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BOLLINGER BANDS

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BOLLINGER BANDS Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s. Having evolved from the   concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades. It consists of a 20 period simple moving average with upper and lower bands. The upper band is 2 standard deviation above the moving average and similarly lower band is 2 standard deviation below the moving average. This makes these bands more dynamic and adaptive to volatility. Interpretation of Bollinger Bands : Mr. John Bollinger described following important interpretation of Bollinger bands in projecting price trends. 1.Big move in price is witnessed on either side when bands tightens/contracts as volatility lessens. 2. The upper band act as area of resistance and lower band act as area of support. 3. When prices move outside the band, it signifies breakout, hence continuation of the trend. 4.B