Bollinger Bands Indicator & Index Price Volatility
When index price volatility increases, prices tend to deviate significantly from the moving average, causing Bollinger Bands to widen. This expansion accommodates potential price movements within 95% of the mean.
When price volatility increases, the Bollinger Bands indicator will expand. The price will be seen surrounded by the bulging Bollinger band. The market will continue to move in this direction if the Index Bollinger band broadens like this, as it is a continuation Index pattern. Usually, this indicates the ongoing index signal.
The Bollinger band trading indicator illustration exhibited below illustrates and shows the Bollinger bulge.
High Index Price Volatility - Bollinger Bands Bulge
When index prices move little, they hug the moving average. The band narrows, cutting the range where 95% of moves happen around the average.
During periods of low index price volatility, prices often consolidate while awaiting a breakout. When Bollinger Band indicators move sideways, it's advisable to refrain from placing stock index trades.
An illustrative example of the Bollinger Band indicator is provided below, specifically showing a moment when the Index Bollinger Band contracted.
Low Index Price Volatility - Bollinger Bands Squeeze
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