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 Cryptocurrency 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 cryptocurrency 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 cryptocurrency chart bitcoin 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 bitcoin trading price action movement. Two standard deviations away from the mean either plus or minus, will enclose 95 % of all bitcoin trading price action movement.
This is why the Bollinger Bands cryptocurrency indicator uses the standard deviation of 2 which will enclose 95 % of all bitcoin trading price action. Only 5 % of cryptocurrency chart bitcoin trading price action will be outside the 3 bitcoin trading bollinger bands, this is why bitcoin traders open or close cryptocurrency trades when bitcoin trading price hits one of the outer Bollinger Bands.
The Bollinger Bands cryptocurrency indicator main function is to measure bitcoin trading price action volatility. What the Bollinger bands upper and lower limits try to do is to confine bitcoin trading price action of up to 95 percent of the possible closing bitcoin prices.
Bollinger Bands cryptocurrency indicator compares the current closing bitcoin trading 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 trading price compared to the moving average. The bitcoin trading price volatility will increase or decrease the standard deviation of the bollinger bands bitcoin technical technical indicator.
