Products
Members
Business Opportunities
University
About FXtrek
Site Map
Home
  Members Tools
FXtrek ID
Password
 
 
 
 

Over the years numerous technical indicators have been developed to describe performance, as well as to predict future price movements. In this section we introduce five of the most useful indicators and explain how they are calculated.

Bollinger Band

Sometimes prices appear to remain in a range for extended periods of time. A good way to describe this situation is to define a moving range around the prices. Some people use an upper boundary and a lower boundary to define the range; the upper boundary is calculated as a moving average of a chosen period plus 5% of the price, and the lower boundary is the moving average minus 5%. These boundaries have the drawback of being too narrow to accommodate price levels when volatility is high and too wide when volatility is low. A better solution, recommended by John Bollinger, defines the upper boundary as a chosen moving average plus twice the corresponding standard deviation, with the lower boundary as the moving average minus twice the standard deviation. The method is described below:

The Bollinger Band includes 3 lines: the upper band, lower band, and the centerline. The centerline is simply the moving average, and the upper and lower bands are, respectively, the center line plus/minus twice the standard deviation. For a p-period Bollinger band:

      Center Line = p-period moving average

      Upper Band = Center Line + 2 x StdDev

      Lower Band = Center Line - 2 x StdDev


Figure 5. Bollinger Band

back    next

 
  FX University
    Introduction
    Charts
    Technical Indicators
    Moving Average
    Bollinger Band
    RSI
    Stochastics
    MACD
    Technical Trading Strategy
    Risk Management
    Glossary
 
  Site Search
  
Comment on the Site   |   Contact Us   |   Privacy Policy   |

Copyright © 2001-2017 FXtrek.com