Bollinger Bands (BB) are a popular tool used in stock analysis, created by John Bollinger in the 1980s. They consist of three lines that show the price range of a stock. The middle line, a Simple Moving Average (SMA), is an average of the stock’s price over 20 days. The other two lines, called Upper and Lower Bands, show how much the stock’s price might change or swing around that average.
By looking at how far the Upper and Lower Bands are from the middle line, traders can get an idea of how volatile or stable a stock is. Usually, the Upper and Lower Bands are set at two standard deviations from the middle line, but traders can change this if they want.
In simple terms, Bollinger Bands help traders see if a stock’s price is likely to go up, down, or stay steady based on how the price has been behaving recently.
Practice: calculate Bollinger Bands
Middle Band – 20-Day Simple Moving Average
Upper Band – 20-Day Simple Moving Average + (Standard Deviation x 2)
Lower Band – 20-Day Simple Moving Average – (Standard Deviation x 2)
The main idea of the indicator is that prices try to return to the average values during impulses.
Now read standard parameters below.
Let’s take BOLL (20,2) as an example.
This means we take the SMA with a period of 20 for the center line and with standard deviations of 2 steps from the price above and below the SMA line for the lower and upper lines.
How to display Bollinger Bands in Sema?
To see Bollinger Bands on a chart, press on the hexagon icon in the right corner of a coin chart. Choose BOLL to display the Bollinger Bands indicator on your chart. You can switch between candles and line format right above.