Bollinger bands two standard deviations

Bollinger bands two standard deviations

Bollinger Bands
Responding to questions
Placing on the market that happens is always a better approach than telling the market what to do. In the late 1970s, while trading warrants and options and in early 1980, when index option trading started, I focused on volatility as a key variable. To volatility, then, I turned once again to create my own approach to trading bands. I tested any number of volatility measures before selecting the standard deviation as a method by which to set the band width. I became especially interested in the standard deviation because of its sensitivity to extreme deviations. As a result, Bollinger Bands are extremely quick to react to large moves in the market.

Bollinger bands are plotted two standard deviations above and below the 20-day simple moving average. The data used to calculate the standard deviation are the same data as those used for simple moving average. Basically, we used standard deviations ranging bands around the plot moving average. The time frame for the calculations is such that it is descriptive of the intermediate-term trend.