Bollinger Bands

Bollinger Bands is a versatile tool combining moving averages and standard
deviations and is one of the most popular technical analysis tools available for
traders. There are three components to the Bollinger Band indicator:

1. Moving Average: By default, a 20-period simple moving average is used. Upper Band: The upper band is usually 2 standard deviations (calculated from 20-periods of closing data) above the moving average.
2. Lower Band: The lower band is usually 2 standard deviations below the moving average.

Bollinger Bands (in blue) are shown below in the chart of the E-mini S&P 500 Futures contract:

There are three main methodologies for using Bollinger Bands, discussed in the following sections:

1. Playing the Bands
2. Bollinger Band Breakouts
3. Option Volatility Strategies