We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
What are Bollinger bands?
Bollinger bands are a popular form of technical price indicator. They are made up of an upper and lower band, set either side of a simple moving average (SMA). Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance.
Discover our online trading platform
Take a look at our interactive charts, designed to make technical analysis faster and clearer.
How to calculate Bollinger bands
Bollinger bands are calculated using three lines drawn onto a price chart. The first line is the SMA of an assets's price, usually within a 20-day period. The upper band is the SMA plus two standard deviations, while the lower band is the SMA minus two standard deviations.
To calculate the SMA, you would take the closing prices for the number of days that you were looking at – normally 20 days – and divide the total sum of all the closing prices by the total number of days.
Once you have the SMA, you can calculate the upper and lower bands:
- The upper band = 20-day simple moving average plus (20-day standard deviation multiplied by 2)
- The lower band = 20-day simple moving average minus (20-day standard deviation multiplied by 2)
Most trading platforms will calculate Bollinger bands for you automatically, but it is still useful for a trader to know what the different bands mean and what can be learnt from them.
What do Bollinger bands tell traders?
Many traders believe that Bollinger bands are an accurate indicator of market volatility. If the bands are wider, it means that a market is more volatile; while narrower bands mean that a market is more stable.
Traders also look for Bollinger ‘squeezes’ and Bollinger ‘bounces’, which are used as indicators for levels of support and resistance. Squeezes – when the upper and lower band contract toward the moving average – could show that there is about to be a breakout of the asset’s price. Conversely, bounces – which occur when the price movement hits the upper band and bounces back down – might be indicative of an upcoming retracement.
However, just like other indicators, Bollinger bands are not always 100% accurate. The information they provide should be used in conjunction with other forms of analysis.
Source: IG charts
Pros and cons of Bollinger bands
Pros of Bollinger bands
Bollinger bands can be useful indicators of a trend in a market – strong trends cause volatility, which is easy to see as the Bollinger bands widen and narrow.
When plotted automatically by a trading platform, Bollinger bands are very user-friendly and can add another dimension to chart analysis for a trader.
Cons of Bollinger bands
As a lagging indicator, Bollinger bands can’t predict price patterns but instead, they follow current market movements. This means that traders might not receive signals until the price movement is already underway.
It is also worth noting that John Bollinger – the man who invented Bollinger bands – has said that they should be used in conjunction with other forms of technical analysis and that they are not fool-proof or fail-safe indicators of market trends.
More about Bollinger bands
Build your trading knowledge
Discover how to trade with IG Academy, using our series of interactive courses, webinars and seminars.
Contact us
Questions about opening an account: +44 (20) 7633 5430 or email: [email protected]
Existing client questions:
+44 (20) 7633 5431 or email: [email protected]
We’re here 24 hours a day, except from 6am to 4pm on Saturday (UTC+8).
Contact us
New clients: +44 (20) 7633 5430 or email [email protected]
Clients: Help & Support
WhatsApp: Click here to chat to us on our official WhatsApp channel, 10am to 7pm (UTC+10), Monday to Friday
IG | Terms and agreements | Privacy | How to fund | Vulnerability | Cookies | About IG
^IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG Group established in London in 1974, and is a constituent of the FTSE 250 index.
The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 70% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.
CFD Accounts provided by IG International Limited. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.
IG provides an execution-only service. The information in this site does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.
The information on this site is not directed at residents of the United States and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG International Limited receives services from other members of the IG Group including IG Markets Limited.
