Bollinger bands by John Bollinger are an N-day simple moving average (see Simple Moving Average) with an upper and lower bands drawn at 1 standard deviation away from the average. The distance multiple is configurable.
Standard deviation (see Standard Deviation) is a statistical measure of how much the values in a data set (the N closing prices in this case) deviate from their average (the mean). When prices are not changing much the deviation is small and the band lines are close to the average. The bands are further away when closing prices are more volatile.
See also Kirshenbaum Bands, which are similar but with a channel width based on standard error from a linear regression.
Copyright 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2014, 2015, 2016, 2017 Kevin Ryde
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