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How Bollinger Bands Bitcoin Indicator Works

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

Bollinger Bands Calculation

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 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 chart bitcoin 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 bitcoin price action movement. Two standard deviations away from the mean either plus or minus, will enclose 95 % of all bitcoin price action movement.

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

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

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