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BOLLINGER BAND WIDTH

Doug Schaff

FX-Strategy

http://www.fx-strategy.com

Characteristic: Volatility & trend indicator
Parameter Defaults:  MA Period  20  controls the measurement period for the average
Std Deviation  2  controls the placement of the bands around the average
Plots:  BLG BandWidth

The Bollinger Band Width indicator is a reflection of the fact that Bollinger Bands tend to widen during sharp price adjustments, seen particularly in trends, while during consolidation they tend to move closer together. This is converted into a line that represents such action.

Bollinger Band Width = (Upper Band - Lower Band)/Middle Band

GBP/USD (2 hr. 20 day)

The effect of trending price or consolidating price on the indicator is to force values higher as a trend develops and lower again as price begins to consolidate or move in a choppy action. Note also the ability to use effective trend lines on the indicator to try and identify when a consolidating market is breaking into a trending nature.

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