How Bollinger Bands Gold Indicator Works

Bollinger Bands indicator calculations uses standard deviations to draw the bands, the default value used is 2.

Bollinger Bands XAUUSD Calculation

middle band indicator line is a simple moving average MA

The upper band line is: Middle line + Standard Deviations

The lower Bollinger band indicator is: Middle line - Standard Deviation

Bollinger Bands gold indicator considers the best default moving average to calculate the Bollinger bands to be 20 periods MA and the bands are then overlaid on the trading chart price action.

Standard Deviation is a statistics concept. It originates from the notion theory of normal distribution. One standard deviation away from the mean average either plus or minus, will enclose 67.5 % of all trading price action movement. Two standard deviations away from the mean either plus or minus, will enclose 95 % of all trading price action movement.

This is why the Bollinger Bands indicator uses standard deviation of 2 that will enclose 95 % of all trading price action. Only 5 % of the chart price action will be outside these 3 gold trading bollinger bands, this is why traders open or close trades when the price hits one of the outer Bollinger Band.

The Bollinger Bands indicator main function is to measure gold trading price action volatility. What the Bollinger bands upper and lower limits try to do is to confine gold trading price action of up to 95 percentage of the possible closing prices.

Bollinger Bands indicator compares & analyzes the current closing gold trading price with the moving average of the closing gold trading price. The difference between these two gold trading prices is the volatility of the current xauusd trading price compared to the moving average. The price volatility will increase or decrease the standard deviation of the bollinger bands technical indicator.

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How Bollinger Bands Gold Indicator Works

Bollinger Bands XAUUSD Calculation