Bollinger Bands Trading Indicator Strategy

Bollinger Bands indicator acts as a measure of volatility. Bollinger Band indicator is a price overlay indicator.

Bollinger Bands indicator consists of three lines or bands: the middle band (moving average), an upper band a lower band. These three bands will enclose the price and the price action will move within these three bollinger bands.

Bollinger Bands indicator forms upper & lower bands around a moving average. The default moving average for bollinger bands indicator is the 20-SMA. Bollinger Bands indicator use the concept of standard deviations to form their upper & lower Bands.

The example of Bollinger Band indicator is displayed and illustrated below.

Bollinger Bands Trading Indicator - How to Trade with Bollinger Band Stock Indices Strategy

Because standard deviation is a measure of Stock Index price volatility & volatility of the market is dynamic, Stock Indices bollinger bands keep adjusting their width. Higher price volatility means higher standard deviation and the more the bollinger bands widen. Low Stock Index price volatility means the standard deviation is lower & the bollinger bands contract.

Bollinger Bands forex indicator use price action to give a large amount of Stock Index price action movement information. The price information given by the this bollinger bands indicator includes:

• Periods of low volatility - consolidation phase of the market.
• Periods of high volatility - extended trends, trending Stock Index markets.
• Support and resistance levels of the price.
• Buy & Sell points of the price.