Bollinger Band width Oil Technical Analysis and Bollinger Band width Oil Trading Signals
Developed by John Bollinger.
This oil indicator is derived from the original Bollinger 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 crude crude oil price & volatility occurs in cycles.
Periods of high volatility is followed by periods of low volatility.
When volatility is high, bands are far apart, the bandwidth 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 red-line represents the lowest Bandwidth value for a previous number of periods.
This line also identifies periods of low volatility
Crude Oil Technical Analysis & How to Generate Oil Trading Signals
Consolidation – Bollinger Squeeze
Bollinger Bandwidth is used to identify the squeeze, which is a consolidation period of crude crude oil price, after which the crude crude oil price then breaks out in a particular direction.
Signals are generated when there is a crude oil price break-out signal is generated by the indicator starting to go up after touching the red line. When the bandwidth line starts to move upward it signifies that volatility is rising as the crude crude oil price is breaking out.
Squeeze
Break-out Signal After Bandwidth Squeeze
However, this is a directionless indicator & needs to be combined with another indicator such as the moving average to determine the direction of the trend/ Break out.