BOLLINGER BANDS

WHAT IS BOLLINGER BAND ?
            Bollinger Bands are volatility (volatility in prices) indicators invented by John Bollinger in the 1980s. It measures the deviation of the price from the normal distribution. It consists of 3 components as middle band, upper band and lower band. The middle band is the reference value for the upper band and the lower band. The upper and lower bands show how much the price has deviated.
CALCULATION OF BOLLINGER BANDS
      When calculating Bollinger bands, the standard deviation is generally accepted as 2 and the period is 20.
image
Upper band: 20 MA+ 2 x Standard deviation
middle band:20 MA(20 period simple moving average)
lower band: 20 MA-2 x Standard deviation
 
         In general, Bollinger bands widen when volatility rises, and Bollinger bands narrow when volatility decreases. Band contraction is a sign that a movement in prices may begin.
Trends are generally formed after the narrowing of the Bollinger bands and are based on the Bollinger closing values.
It does not take into account needle throws that occur outside the band.
Band broadening, on the other hand, is a sign that the movement in prices will end.
Trends usually end after expansions.
               Prices are high in the upper band and low in the lower band. This definition can be used to make BUY and SELL decisions by comparing price movements and the movements of different indicators used. In general, if prices are close to the average, volatility is low.
 
            Bolinger band is a system that can make good profits when used correctly.