## Bollinger Bands

**Bollinger Bands** are part of the Moving Average group, and in appearance its display is similar to the Mov Avg - Band indicator.

While the **Mov Avg - Bands** indicator displays two lines at user defined percentages above and below the moving average (which is not displayed), the **Bollinger Band** displays three lines: the underlying moving average, and two other lines, above and below the moving average, which are plotted as plus/minus twice the standard deviation (a statistical calculation closely related to volatility).

The technique was developed by John Bollinger and normally employs a moving average period of 20 days. The statistical deviation is a statistical formula designed to identify price dispersal around an average value. The bands formed by the two deviations will normally include 95% of the chart's price data between the two trading bands.

The yellow line is a 20 interval simple moving average, the two blue upper and lower bands are, respectively, the center line plus/minus twice the standard deviation.

For trading purposes, the upper and lower bands can be used as price targets. Prices are seen to be overextended on the upside (overbought) when the closing price crosses above the upper band, and oversold when the closing price crosses below the lower band.

#### Bollinger Bands compared to Mov Avg - Bands

When the two indicator types are plotted together, the effect of the standard deviation calculation for the two Bollinger Bands is clear:

While both indicators rely on the same 20 interval simple moving average, the statistical analysis of price volatility used to plot each of the Bollinger bands more closely tracks the actual price movements and tends to give earlier signals than the Mov Avg - Bands (thinner, lighter blue lines) indicator.

#### User Settings

The **Parameters** tab of the **Bollinger Bands Properties** dialog box has the following user

##### Period for Averaging

The user can set the number of previous intervals that will be averaged with the current interval to produce the moving average for a given interval. This setting, and its effect, is the same as for the **Mov Avg - Simple** indicator.

##### Standard Deviations

Enter the multiple by which the standard deviation result will be multiplied.

The default setting is 2, this will double the standard deviation result before it is added or subtracted to the moving average level. This is the default setting.

The setting include up to three decimal places, for example 1.666, as well as 2.25, 1.5, etc.

**Note** - Any setting above 5 is unlikely to produce any meaningful result.

##### Display

Like the simple moving average line, the Bollinger bands are overlaid on the price chart.

The exact display of the bands is controlled on the **Plots** tabbed page of the **Bollinger Bands Properties** dialog box:

The display settings for each band and the moving average line are independently set.

First select either B.Bands MA, **B.Bands Upper** or **B.Bands Lower** from the drop-down menu (right). Make the display adjustments for one, then select the others and make the adjustments for them.

The **Style** selected for each band can be one of the following:**Solid**, **Dashes**, **Dots**, or **Points**.

Once the style is selected the **Color**, **Weighting** and **Visibility** for each band can also be controlled from this page.

The **Scale's** display for both bands is controlled from the **Scale Settings** and **Scale Appearance** tabbed pages.

## Related

- Indicator Type Settings
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