Understanding Bollinger Bands (Part II)
By Ahmad Hassam

Bollinger Bands are based on the standard deviation. A standard deviation is the measure of the spread of a set of number. The higher the difference between the closing prices of a currency pair and the average price, the larger the standard deviation and the volatility of the currency pair. 95% of the recent closing prices are expected to be within the two standard deviations of the currency pair when the markets are range bound. In a range bound market, in other words, if the price pops above or below the Bollinger Bands, it does not belong there.

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