Topic: Bollinger Bands Part 1– Tim Young, ()

The second Volatility indicator we will look at is Bollinger Bands. To do justice to this indicator, we need to cover a couple of statistical terms and this will form part1; next week part 2 will study the application of the Bollinger Bands on price charts.

Developed by John Bollinger, Bollinger Bands® are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. The bands automatically widen when volatility increases and contract when volatility decreases. (www.stockcharts.com).

Presentation points:
- Distribution of prices versus returns;
- The standard deviation formula;
- Calculation of the standard deviation of stock prices in Excel.