|  NOV 1994

The Bollinger Band And Trend by John Forman

The Bollinger Band And Trend by John Forman Here are ways to use Bollinger Bands to judge the trending tendency of markets, using the distance between the upper and lower bands. Never be afraid to look at an old technical indicator in a new way. In my daily study of the markets, ranging from fixed income and foreign exchange to energy futures, I experiment with old favorites in an effort to find the best combination for my work. Recently, I made an observation that gave me yet another tool, one that allows me to pick out trends, or the lack thereof, easier than I could previously. Bollinger Bands express historical volatility in the market by plotting bands above and below a moving average (MA). The most commonly used average is 20 days, and the standard deviation for 20 days. The bands are plotted two standard deviations away from that average. This creates an envelope of sorts in which the vast majority of trading takes place.

by John Forman