InvestorQ : I have seen live indicators of Bollinger Bands in my technical software. Can you help me understand what exactly Bollinger Bands are?
Riya Dwivedi made post

I have seen live indicators of Bollinger Bands in my technical software. Can you help me understand what exactly Bollinger Bands are?

Answer
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rhea Babu answered.
1 year ago


Bollinger Bands are a type of price envelope or a value overlay, as they are popularly referred to, and were developed by John Bollinger. What exactly are price envelopes? The price envelopes define upper and lower price range levels.) Bollinger Bands are envelopes plotted at a standard deviation level above and below a simple moving average of the price. The beauty of the Bollinger Bands is that they automatically factor in for the risk of volatility in markets due to the consideration of standard deviation (the root of variance) into the calculation. Since the distance of the bands is based on standard deviation, they automatically adjust to volatility swings in the underlying price.

Bollinger Bands would typically use 2 parameters viz. time period and standard deviations. The default values are 20 for time period and 2 for standard deviations, although you may customize the combinations based on your unique and specific needs. These Bollinger bands help us to determine whether prices are high or low on a relative basis. They are used in pairs, both upper and lower bands and in conjunction with a moving average. Please note that the pair of bands is not intended to be used on its own. Use the pair to confirm signals given with other indicators. That means Bollinger Bands are not stand alone indicators in their own right. They are useful as supplementary tools to confirm, ratify or reinforce your view on the stock or the markets.