Bands of Bollinger

The bands of Bollinger are an economic tool for analysis developed by John Bollinger. They are used in Finance of market for technical analyzes and make it possible to evaluate the probable evolution of price or indices.

Representation

The bands of Bollinger resemble the Enveloppes of moving average but with the difference of those they are traced with variable percentages.

Concretely, they represent by three curves in addition to curve of the value to be observed:

the moving average of the value
" bandes" lower and higher, calculated starting from the moving average, which represents the volatility of this same moving average.

Interpretation

Theoretically, there is more than 90% of chance that the evolution of the value is established within the framework of the bands. If the markets are volatile (the standard deviation is important) or if the tendency is strong, then the bands are broad. On the contrary, an absence of tendency is observed by a weak variation of the bands.

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