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How Bollinger Bands Gold Indicator Works

The Bollinger Bands indicator uses standard deviations to create the bands. It sets the default at 2.

Bollinger Bands XAUUSD Calculation

middle band indicator line is a simple moving average MA

The upper band is the middle line plus standard deviations.

The lower part of the Bollinger band indicator shows: Middle line - Standard amount of change

Bollinger Bands for gold use a 20-period moving average by default. Overlay the bands on the price chart.

Standard deviation comes from statistics and normal distribution ideas. One step from the average, up or down, covers 67.5% of price moves. Two steps from the average traps 95% of all trading price shifts.

Bollinger Bands utilize a standard deviation of 2, encompassing 95% of all trading price actions. Consequently, only 5% of price movements will fall outside these three Bollinger Bands, which is why traders typically decide to open or close trades when prices reach these outer bands.

The primary purpose of the Bollinger Bands indicator is to assess the volatility of gold trading price action. The upper and lower limits of the Bollinger Bands aim to encompass approximately 95% of the possible closing price movements in gold trading.

The Bollinger Bands indicator assesses the current closing gold price relative to its moving average. The disparity between these figures indicates the volatility of the current XAUUSD trading price compared to the average. Variations in price volatility will affect the standard deviation used in the Bollinger Bands technical indicator.

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