Bollinger Band Indicator and Stock Indices Price Volatility
When Stock Indices price volatility is high; prices close far away from the moving average, Stock Indices Bollinger Band width increases to accommodate more possible price action movement that can fall within 95% of the mean.
Bollinger Band indicator will widen as price volatility widens. This will show as Bollinger band bulges around the price. When the Stock Indices Bollinger bands widen like this it's a continuation Stock Indices pattern and price will continue moving in this direction. This is normally a continuation Stock Indices signal.
The Bollinger bands trading indicator example below illustrates the Bollinger bulge.
High Stock Index Price Volatility - Bollinger Band Bulge
When Stock Indices price volatility is low: prices close closer towards the moving average, width decreases to reduce the possible price action movement that can fall within 95% of the mean.
When Stock Indices price volatility is low price will start to consolidate waiting for price to breakout. When the Stock Indices Bollinger bands indicator is moving sideways it's best to stay on the sidelines and not to place any Stock Index trades.
The Bollinger bands indicator example is shown below when the Stock Indices Bollinger bands narrowed.
Low Stock Index Price Volatility - Bollinger Band Squeeze
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