Bollinger Bands

Bollinger Band is constructed by placing upper and lower bands around a moving average, the band width is not constant but instead proportional to the standard deviation (SD-Standard Deviation) from the moving average over the specified period of time.
BBU = MA + s*SD — upper border;
BBL = MA — s*SD — lower border;
SD = SQRT (SUM ((CLOSE — SMA (CLOSE, N))^2, N)/N)

How to use BB:

• After contraction of the BB line strong market movement may be expected;
• If the market exits the borders of BB reversal may be expected soon (usually it is a corrective retracement);
• Quite often the market returns back once it reaches the moving average and only then it breaks MA.
  
• Bollinger Bands widen when the prevailing trend becomes stronger or at the beginning of a new trend. A good trend confirmation is when bands widen and volume rises. In a bullish market, moving average is the support level, whereas in a bearish market it is the resistance level.
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