✔️ Information reviewed and updated in April 2024 by Eduardo López
Today there are a large number of financial indicators such as Bollinger Bandwidth that we must take into account when operating in the financial sector. These indicators can be our best allies when making decisions and interpreting the data, thus helping us to draw conclusions.
One of the most used indicators in the financial sector are the so-called Bollinger Bands or Bollinger Bandwidth. Its importance is very high, as well as the usefulness that we can find here. That is why, below, we will tell you everything you need to know about these famous bands.
➡What are Bollinger Bandwidth? ✨
Bollinger bands are a type of indicator which is represented in the form of two parallel lines, bands, which are executed within a graph. These bands allow creating a range which is used as a comparison for the asset analysis.
We could say that the Bollinger Bandwidth It is a type of indicator representing in a graph which is designed for the analysis of the behavior of an asset. This behavior is mainly focused on the value, price and quotation of the asset, be it cryptocurrencies, gold, oil, currencies, among other assets.
➡What are Bollinger Bandwidth? ✨
One of the most common uses of the bands is the comparison between the price of the asset and the volatility in the market. In this way, we can expressly see how the price has changed and what its peaks and falls have been.
Another use we find for Bollinger Bandwidth is in determining price bubbles. This is very important, since bubbles can trigger drastic falls in prices, as well as crises derived from the bursting of the bubble, as happened in 2008.
➡How is Bollinger Bandwidth calculated? ✨
The calculation is somewhat complex, since it involves the use of a series of formulas since the Bollinger Bandwidth is made up of 3 sub-bands, one upper, one lower and one average. This makes each band have its own formula.
To calculate the Bollinger Bandwidth you must calculate each of the bands independently in order to create the entire graph.. Most brokers and intermediaries offer this type of indicator automatically so that you do not have to break your head calculating it.
➡How can we use them? ✨
One of the first uses that we can find for Bollinger bands is the analysis of the price change in an asset. This is very useful to try to determine the trend in it, that is, if it will go higher or lower.
It is also very useful to know what position to take when investing, for example, if we are going low or high. In binary options, Bollinger Bandwidths are very useful in deciding how to trade. Finally, experts often use it as a way to do a historical analysis of price behavior.
