Bollinger Band Indicator

Derived from the original Bollinger bands.

The Bollinger Fib ratios is a volatility based indicators but it does not use the standard deviation to calculate the width of the bands instead it uses a smoothed ATR that are multiplied with Fibonacci ratios of 1.618, 2.618, & 4.236.

The smoothed lines that are multiplied with Fib ratios are then added or subtracted from the Moving Average.

This forms Three upper Fibo bands & 3 lower Fibo bands

Middle band forms the basis of the market trend.

Technical Analysis and How to Generate Signals

This indicator used to determine point of support and resistance for indices.

Lines below represent support points while those above are resistance zones.

The outermost bands provide the strongest resistance/support.

The inner most bands provide least support/resistance.

The innermost band represents Fibonacci 38.2 % retracement level

The second band represents Fibo 50 % retracement level

The outermost band represents Fibo 61.8 % retracement level

The indicator is used to determine points where stock indices trading price might reverse. (Price Pullback Levels)

When stock indices trading price hits one of the lines & reverses then an entry or exit signal gets generated.

However, it's always good to combine the signal with other confirmation indicators such as the moving average to confirm the signal as displayed below.

Technical Analysis in Indices Trading