Bollinger Band Trading Indicator Strategy

Bollinger Band acts and is used as an estimate of the volatility. Bollinger Bands indicator is a price overlay indicator.

Bollinger Band consists of 3 lines or bands: the middle band (moving average), an upper band a lower band. These 3 bands will enclose the price and the price action will move within these 3 bollinger bands.

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

The example of Bollinger Bands indicator is displayed and illustrated and shown below.

Bollinger Band Indicator - How to Trade with Bollinger Bands Stock Index Trade Strategy

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

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

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

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