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Charting and Studies User Guide - CQG.com

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Page 222<br />

Bollinger B<strong>and</strong>s® (BBnds)<br />

The purpose of Bollinger B<strong>and</strong>s is to provide a relative definition of high <strong>and</strong> low. By definition<br />

prices are high at the upper b<strong>and</strong> <strong>and</strong> low at the lower b<strong>and</strong>. This definition can aid in rigorous<br />

pattern recognition <strong>and</strong> is useful in <strong>com</strong>paring price action to the action of indicators to arrive at<br />

systematic trading decisions.<br />

A Bollinger B<strong>and</strong> consists of two lines, one line displayed above <strong>and</strong> the other below the userspecified<br />

moving average.<br />

The distance between each line <strong>and</strong> the moving average line represents the number of Square<br />

Root Deviations of each price away from the moving average, multiplied by a user-specified<br />

constant.<br />

The following steps are used to calculate a Bollinger B<strong>and</strong>:<br />

• Calculate a Moving Average based on the type, period, <strong>and</strong> price parameters.<br />

• Calculate the Square Root Deviation.<br />

• Multiply the calculated Square Root Deviation by the number specified via the Std Dev<br />

parameter in the Bollinger B<strong>and</strong> setup window.<br />

• Add the calculated value to the Moving Average to produce the upper Bollinger B<strong>and</strong><br />

line, <strong>and</strong> subtract the calculated value from the moving average to produce the lower<br />

Bollinger B<strong>and</strong> line.<br />

For additional information, see http://www.bollingerb<strong>and</strong>s.<strong>com</strong>/.<br />

Basic <strong>Studies</strong>

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