Bollinger Bands Indicator and Price Volatility

When price volatility is high; trading prices close far away from the moving average, the Bollinger Bands width increases to accommodate more possible price action movement which can fall within 95 % of the mean.

Bollinger bands indicator will widen as price volatility widens. This will show as bollinger band bulges around the price. When the bollinger bands widen like this it is a continuation pattern and price will continue moving in this direction. This is normally a continuation forex trade signal.

The Bollinger bands indicator example below illustrates the Bollinger bulge.

High Price Volatility - Forex Bollinger Bands Bulge

When price volatility is low: trading prices close closer toward the moving average, the width decreases to reduce the possible price action movement which can fall within 95 % of the mean.

When price volatility is low price will start to consolidate waiting for price to breakout. When the bollinger bands indicator is moving sideways it is best to stay on the sidelines and not to place any trades.

The Bollinger bands indicator examples is illustrated below when the bollinger bands narrowed.

Low Price Volatility - Bollinger Band Indicator - Bollinger Bands Squeeze