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Bollinger Bands measure volatility by plotting a series of three bands. The middle band represents the moving average (SMA or WMA or EMA). The upper band is a set number of standard deviations higher than the middle band (generally 2), and the lower band is a set number of standard deviations (generally 2) lower than the middle band. You set the distance of standard deviation when you create the study.
To apply Bollinger Bands
From within a chart, from the Edit menu select Studies.
Choose Bollinger Bands and Add the study.
Complete parameters as necessary.
Bollinger Bands are calculated like this:
ML = Avg. (N)
TL = ML + (D*StdDev)
BL = ML — (D*StdDev)
ML - middle line
Avg(N) - SMA or WMA or EMA
TL - top line
BL - bottom line
N — is the number of periods used in calculation;
StdDev — the Standard Deviation.
StdDev = SQRT(SUM[(CLOSE — SMA(CLOSE, N))^2, N]/N)