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Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders. There are three components to the Bollinger Band indicator:
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- : By default, a 20-period simple moving average is used.
- : The upper band is usually 2 standard deviations (calculated from 20-periods of closing data) above the moving average.
- : The lower band is usually 2 standard deviations below the moving average.
Bollinger Bands (in blue) are shown below in the chart of the E-mini S&P 500 Futures contract:
There are three main methodologies for using Bollinger Bands, discussed in the following sections:
- Playing the Bands
- Bollinger Band Breakouts
- Option Volatility Strategies
Next Page -Playing the Bands |
