It uses a moving average. It also uses standard deviation. It is one of the technical indicator that apply statistics. It is an excellent indicator that can be used for stock. Also virtual currencies. Today I will talk about Bollinger band.
±1σ ＝ n day moving average ± n day standard deviation
±2σ ＝ n day moving average ± n day standard deviation*2
±3σ ＝ n day moving average ± n day standard deviation*3
standard deviation＝√(sum of the squares of the closing prices for n * n days – the square of the sum of the closing prices for n days)÷(n×(n－1))
There are three types of Bollinger Bands. ±1, ±2, ±3. ±2α is often used in trading. I will explain how to see it using an actual chart.
This is the default chart. Let is add Bollinger Bands from here.
±2α indicates blue. Orange is a middle line. Ninety five percent of the chart is told to fit within the frame of 2α line. It is trend sign when it goes out of the frame. In other words, using this Bollinger bands makes it easier to understand the strength of the chart. So it is better for trend followers. if it sticks out of up, it will be uptrend. If it sticks out of down, it will be down trend.