Bollinger Bands
Bollinger Bands are a type of financial indicator used to measure market volatility. They are composed of three lines: an upper band, a lower band, and a middle band. The upper and lower bands are typically two standard deviations away from the middle band, which is a simple moving average. The bands expand and contract as the price of the underlying security fluctuates. When the price of the security is near the upper band, it is considered overbought, and when it is near the lower band, it is considered oversold. Bollinger Bands are used to identify potential entry and exit points for traders.
History of Bollinger Bands
Bollinger Bands were developed in the early 1980s by John Bollinger, a financial analyst and trader. He developed the bands as a way to measure the volatility of a security. The bands are based on the idea that prices tend to stay within a certain range, and when they move outside of that range, they are likely to return to it. Bollinger Bands are used by traders to identify potential entry and exit points, as well as to identify potential trends.
Comparison Table
| Indicator | Upper Band | Middle Band | Lower Band |
|---|---|---|---|
| Bollinger Bands | 2 Standard Deviations Above Middle Band | Simple Moving Average | 2 Standard Deviations Below Middle Band |
Summary
Bollinger Bands are a type of financial indicator used to measure market volatility. They are composed of three lines: an upper band, a lower band, and a middle band. The upper and lower bands are typically two standard deviations away from the middle band, which is a simple moving average. Bollinger Bands are used to identify potential entry and exit points for traders. For more information about Bollinger Bands, you can visit Investopedia, The Balance, and Investing.com.
See Also
- Moving Average
- Relative Strength Index (RSI)
- Stochastic Oscillator
- Average Directional Index (ADX)
- Commodity Channel Index (CCI)
- On Balance Volume (OBV)
- Parabolic SAR
- Fibonacci Retracement
- Price Channel
- Envelope
