Bollinger Band - Low

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Bollinger Band - Low

Variable List Abbreviation: BBandLow

 

Variable Mode(s): Standard, Stock, Futures1, and Futures2

[ Note: uses selected close variable in Stock, Futures1, and Futures2 modes ]

 

Parameter(s): BBandLow time periods, BBandLow StnDev multiplier

 

Description:

Bollinger Band Low creates a band below price.  Because the band is created by subtracting the standard deviation of price from the moving average of price, the band width is determined by the fluctuation in price over the last n time periods (advantage of quick band width reaction to large movements in the market).  Thus the band widens when price fluctuates wildly and narrows when price shows very little fluctuation.  Adjustment of the time periods provides a means of focusing on anything from short term trends to long term trends.  Adjustment of the standard deviation multiplier controls the relative width of the band and thus determines the strength of the price movement needed for a price breakout (movement below the band).  A higher standard deviation multiplier increases the relative band width (stronger price movement needed for a breakout), while a lower standard deviation multiplier decreases the relative band width (weaker price movement needed for a breakout).  In statistics, if data is normally distributed, then about 68% of the data will occur within one standard deviation of the mean, 95.5% within two standard deviations of the mean, and 99.7% within three standard deviations of the mean.  Because prices may or may not be normally distributed, this information should only be used as an estimate for setting the standard deviation multiplier.

 

Calculation:

n period moving average - multiplier * n time period standard deviation