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Bollinger Bands Trading Strategies

Bollinger Bands Stock Index Indicator Strategy

Bollinger Bands indicator shows how much the price changes. Bollinger Band indicator is an indicator on the price chart.

The Bollinger Bands indicator is composed of three distinct lines: a central band (typically a moving average), an upper boundary, and a lower boundary. These three lines serve to encapsulate the price action as it fluctuates within their confines.

Bollinger Bands shows lines that go above and below a moving average MA. The normal moving average(MA) for bollinger bands is the 20-SMA. Bollinger Band uses the idea and math of standard deviations to make its lines above and below.

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

Trading Stock Index with Bollinger Bands Strategy

How Do I Trade Stock Index with Bollinger Bands Strategy

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

The Bollinger Band fx indicator uses price action to share a lot of information about how the price moves. The price information from bollinger bands includes:

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

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