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Volatility

Bollinger Bands

BB

Places an upper and lower band at N standard deviations above and below an SMA of the close price. The bands widen when volatility increases and contract when it decreases. Traders watch for price touching or breaking the bands as potential reversal or breakout signals.

Tips

A band squeeze (narrow width) often precedes a high-volatility breakout; watch for the direction of the first decisive candle out of the squeeze
Riding the upper band is normal in strong uptrends; do not automatically short just because price touches the upper band

Parameters

Period
2 - 100
Std Dev
0.5 - 4