Bollinger Bands indicator is very much similar to the Envelopes, with the following difference only. The last has limits below and above the moving average, with definition in percentage. The BB’s limits are located in distance equal to definite quantity of average deviations depending on the volatility: the distance is greater when the market is unstable and is less when the market is stable.
BB may be placed on the price schedule, as well as on the indicator chart. Bollinger Bands peculiarity is that the prices are in limits of the upper and bottom limits and the distance is getting larger in the most dynamic periods and are more narrow once the market is quiet.
Sharp rates changes normally come after the lines are getting closer. And if the prices are exceeding the limits, the current trend is keeping. Change of the trend direction is possible if the ups and the downs outside the line will be followed by the ups and downs inside the line. To forecast the price directions it’s important to know that the price change started within one of the limits would normally reach the opposite limit.
