Bollinger bands are a measurement of volatility. This is a very popular indicator created by John Bollinger. They can be used in many different ways. These are created by measuring the 2 standard deviation from a 20 day moving average of the price.They have three part to this technical indicator:
The moving average: This is the 20 day simple moving average of the prices
The lower band: The lower band is simple moving average minus the 2 standard deviation. therefore located below the middle band.
The upper band:The upper band is simple moving average plus the 2 standard deviation. therefore located above the middle band.
Here is an example of the Bollinger band. We have taken our spread betting graph of the WTI Crude oil:
Now lets look at how the Bollinger Bands are used in the various spread betting strategies: