- Bollinger Bands Lines
The indicator consists of three simple moving average lines.
The Central SMA has a period of 20. This is the main line of the indicator. It shows the direction of price movement and its changes. The upper and lower lines form the price channel of the indicator.
The shape of the channel does not depend on the fluctuations of the Central SMA and does not always repeat its movement. The channel shows how the volatility of the asset changes. It can expand and contract.
If the channel has expanded, then the volatility of the asset has increased. Its price changes strongly and quickly, and the market appears up and down trends. If the channel is narrowed — the volatility has fallen. The price of the asset is almost unchanged, and a sideways trend is formed in the market. When trading on a sideways trend, remember that the Bollinger Bands may give inaccurate signals.
Pronounced trends and sideways trend regularly change each other, so the channel Bollinger Bands is narrowing and expanding constantly. The price of the asset is inside the channel most of the time — about 95%.