Bollinger Bands Indicator and Price Volatility

When trading price volatility is high; prices close far away from the moving average, the trading Bollinger Bands width increases to accommodate more possible trading price action movement which can fall within 95 percent of the mean.

Bollinger bands indicator will widen as trading price volatility widens. This will show as bollinger band bulges around the trading price. When the trading bollinger bands widen like this it is a continuation pattern and trading price will continue moving in this direction. This is normally a continuation trade signal.

The Bollinger bands indicator example explained and illustrated below illustrates the Bollinger bulge.

High Price Volatility - Bollinger Bands Indicator - Bollinger Band Bulge

When trading price volatility is low: prices close closer toward the moving average, the width decreases to reduce the possible trading price action movement which can fall within 95 percent of the mean.

When trading price volatility is low trading price will start to consolidate waiting for trading price to breakout. When the trading bollinger bands indicator is moving sideways it is best to stay on the sidelines and not to place any stock trades.

The Bollinger bands indicator examples is illustrated below when the trading bollinger bands narrowed.

Low Price Volatility - Bollinger Bands Indicator - Bollinger Bands Squeeze