Take a look at the other Trade Winx Chart Performance based on Bollinger Bands
#Advanced get bollinger band formula plus
The upper band is the moving average plus a standard deviation, and the lower band is the moving average less the standard deviation. Between the two bands is a moving average, typically a 20-day simple moving average (SMA).īollinger Bands are plotted at a standard deviation above and below a simple moving average of the price. The outer bands are usually set 2 standard deviations above and below the middle band.īollinger Bands look like an envelope that forms an upper and lower band1 around the price of a stock or other security (see the chart below). The look-back period for the standard deviation is the same as for the simple moving average. A simple moving average is used because the standard deviation formula also uses a simple moving average. The middle band is a simple moving average that is usually set at 20 periods. Lower Band = 20-day SMA – (20-day standard deviation of price x 2)īollinger Bands consist of a middle band with two outer bands. Upper Band = 20-day SMA + (20-day standard deviation of price x 2) Middle Band = 20-day simple moving average (SMA) Exponential moving averages are a common second choice.Usually the same period is used for both the middle band and the calculation of standard deviation.
The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Typical values for N and K are 20 and 2, respectively. Typically the Upper and Lower Bands are set to two standard deviations away from the SMA (The Middle Line) however the number of standard deviations can also be adjusted by the trader.īollinger Bands consist of a N-period moving average (MA), an upper band at K times an N-period standard deviation above the moving average (MA + Kσ), and a lower band at K times an N-period standard deviation below the moving average. The SMA then serves as a base for the Upper and Lower Bands which are used as a way to measure volatility by observing the relationship between the Bands and price. The line in the middle is usually a Simple Moving Average (SMA) set to a period of 20 days (the type of trend line and period can be changed by the trader however a 20 day moving average is by far the most popular).
Bollinger Bands consist of a band of three lines which are plotted in relation to security prices.
Bollinger Bands (BB) are a widely popular technical analysis instrument created by John Bollinger in the early 1980’s.
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