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Bollinger Bands are plots of Standard Deviations above and below a moving average. Standard Deviation is a mathematical method used in Statistics which when used in this fashion, essentially gives a measure of the volatility in the data being analyzed. For most of teh time, any given market will travel withing 2 standard deviations of the average. |
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Bollinger Bands are plots of an x number of Standard Deviations above and below a simple moving average of n periods. Standard Deviation is a mathematical method used in Statistics which essentially gives a measure of the volatility in the data being analyzed.
Following from this, a High Standard Deviation measure would indicate a high volatility and a Low Standard Deviation measure would indicate a low volatility. Looking at the Chart below, this changing in underlying volatility is visible as the Bands expand and contract over time. |
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