How Bollinger Bands Silver Indicator Works

Bollinger Bands indicator calculations uses standard deviations to draw the bands, the default value used is 2.

Bollinger Bands XAGUSD Calculation

The middle Bollinger band technical indicator line is a simple moving average

The upper Bollinger band line is: Middle line + Standard Deviation

The lower Bollinger band line is: Middle line - Standard Deviation

Bollinger bands silver indicator considers the best default moving average to calculate the Bollinger bands to be 20 periods moving average and the bands are then overlaid on the silver chart xagusd trading price action.

Standard Deviation is a statistics concept. It originates from the notion of normal distribution. One standard deviation away from the mean either plus or minus, will enclose 67.5 % of all xagusd trading price action movement. Two standard deviations away from the mean either plus or minus, will enclose 95 % of all xagusd trading price action movement.

This is why the Bollinger Bands indicator uses the standard deviation of 2 which will enclose 95 % of all xagusd trading price action. Only 5 % of silver chart xagusd trading price action will be outside the 3 silver trading bollinger bands, this is why silver traders open or close xagusd trades when xagusd trading price hits one of the outer Bollinger Bands.

The Bollinger Bands indicator main function is to measure xagusd trading price action volatility. What the Bollinger bands upper and lower limits try to do is to confine xagusd trading price action of up to 95 percent of the possible closing xagusd prices.

Bollinger Bands indicator compares the current closing xagusd trading price with the moving average of the closing xagusd trading price. The difference between these two xagusd trading prices is the volatility of the current xagusd trading price compared to the moving average. The xagusd trading price volatility will increase or decrease the standard deviation of the bollinger bands xagusd technical technical indicator.