Bollinger Band width Gold Trading Analysis and Bollinger Band width Trading Signals
Developed by John Bollinger.
This gold technical indicator is derived from the original Bollinger technical indicator.
Bandwidth is a measure of the width of the Bollinger Bands.
Calculation
Bandwidth = Upper Band - Lower Band
Middle Band
This is an oscillator, based on the theory that xauusd price and volatility occurs in cycles.
Periods of high volatility is followed by periods of low volatility.
When volatility is high, bands are far apart, the band width will also be wide apart.
When volatility is low, Bands are narrow and the bandwidth indicator will also not be narrow.
The blue line represents the highest Bandwidth value for a previous number of periods.
This line also identifies periods of high volatility
The redline represents the lowest Bandwidth value for a previous number of periods.
This line also identifies periods of low volatility
Gold Analysis and Generating Trading Signals
Consolidation - Bollinger Squeeze
Bollinger Bandwidth is used to identify the squeeze, which is a consolidation period of xauusd price, after which the xauusd price then breaks out in a particular direction.
Signals are generated when there is a xauusd price breakout signal is generated by the indicator starting to go up after touching the red-line. When the bandwidth line starts to move up it signifies that volatility is rising as the xauusd price is breaking out.
Squeeze
Breakout Signal After Bandwidth Squeeze
However, this is a directionless indicator and needs to be combined with another indicator such as the moving average to figure out the direction of the trend/ Break out.