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[Overlay] Bollinger Bands

ProTrader

Forex Supporter
Developed by John Bollinger, Bollinger Bands are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes a volatility increase and decreases. The bands automatically widen when volatility increases and narrow when volatility decreases. This dynamic nature of Bollinger Bands also means they can be used on different securities with the standard settings. For signals, Bollinger Bands can be used to identify M-Tops and W-Bottoms or to determine the strength of the trend.

Bollinger Bands consist of a middle band with two outer bands. The middle band is a simple moving average that is usually set at 20 periods. A simple moving average is used because a simple moving average is also used in the standard deviation formula. The look-back period for the standard deviation is the same as for the simple moving average. The outer bands are usually set 2 standard deviations above and below the middle band.
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Settings can be adjusted to suit the characteristics of particular securities or trading styles. Bollinger recommends making small incremental adjustments to the standard deviation multiplier. Changing the number of periods for the moving average also affects the number of periods used to calculate the standard deviation. Therefore, only small adjustments are required for the standard deviation multiplier. An increase in the moving average period would automatically increase the number of periods used to calculate the standard deviation and would also warrant an increase in the standard deviation multiplier. With a 20-day SMA and 20-day Standard Deviation, the standard deviation multiplier is set at 2. Bollinger suggests increasing the standard deviation multiplier to 2.1 for a 50-period SMA and decreasing the standard deviation multiplier to 1.9 for a 10-period SMA.
 
bollinger band also can work as support and resistance level. the upper band work as resistance and the lower band work as support level. the function of upper and lower band will change when the price form a trend. the upper band could become support level when the trend is up and the lower band could become resistance level when the trend is down.
 
Well I dont like using bollinger band as support and resistance rather what I do is just for me try and make use of trend line and determine my support and resistance level from there this make it very easy for me to know the break-out easyly compare to bollinger band which is a bit complicated but it can be a good indicator to detect trend also sometime so its need carefull study.
 
bollinger band is an awesome indicator because this indicator make the trend for you very clear also contain the support and resistance lines and there is too many strategies depending on this great indicator
 
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