Forum Archive Index - May 2000

["Ian Rawnsley" <ianr@ie3.co.nz>]

Title:

Oliver et al,

Bollinger Bands:
Are trading bands based on the volatility of prices around a simple moving average.
Bollinger Bands were developed by John Bollinger.

The result of using volatility to compute the spacing of the bands above and below the average is that the spacing will vary depending on the equity's volatility. Volatility in this case is measured as the statistical standard deviation computed on the same set of data as the moving average.

To compute the bands, Bollinger recommends using a 20 day Moving Average, which is arithmetic average of the previous 20 days of data. Volatility for the same period, is the variation of the data around the average for the last 20 days. This variation is measured by the standard deviation of the data from the average. The actual trading band is plotted some number of standard deviations above and below the average.

Bollinger has developed some rules that he has found to give indications of possible price moves:
1.    Sharp moves in price tend to occur after the Bands tighten, and the closer to the average, the better.
2.    Moving outside the Bands signals a continuation of the move until the prices drop below or inside of the Bands.
3.    Moves starting at one Band tend to go to the opposite Band.


I use Bollinger Bands in all of my charts.

SMA - I assume to be Simple Moving Average. It is just as you learnt at school (hopefully).

If you are in Auckland, then come to the next STANZ meeting on Thursday evening, May 25th, at 7:30pm at the McGhie Lecture Theatre, Epsom Campus, 73 Epsom Avenue and join our society.

I have not seen the chart you mentioned so I cannot answer the other questions.

Ian Rawnsley

 

-----Original Message-----
From: owner-sharechat@sharechat.co.nz [mailto:owner-sharechat@sharechat.co.nz]On Behalf Of Oliver Shapleski
Sent: Wednesday, 24 May 2000 16:24
To: sharechat@sharechat.co.nz
Subject: [sharechat] Understanding Big Charts


Could someone please explain these charts to me - I don't understand:
(a) what the little spreads mean and how they are displayed
(b) Bollinger bands and SMA
(c) in the top chart which line is which - I can't differentiate the colours.
(d) the bottom two graphs in the slightest.

Cheers,
Oliver