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Coding the Bollinger Band indicator with Python
The Bollinger Band indicator is one of the most used in technical analysis. This indicator was developed by John Bollinger in the 1980s.
Bollinger was a financial analyst who noticed that the price of a stock would often move in a predictable manner between the upper and lower bands of a moving average.
He developed the Bollinger Band indicator to help traders visualize these patterns and make more informed trading decisions.
The Bollinger Band indicator is a technical analysis tool that consists of a moving average and two bands (upper and lower) placed above and below the moving average. The bands are typically set two standard deviations above and below the moving average, which means that they will encompass approximately 95% of the price data.
The idea behind the Bollinger Band indicator is that prices will tend to remain within the upper and lower bands, but will break out of the bands during periods of high volatility.
When the price breaks out of the upper band, it is considered to be overbought, and when it breaks out of the lower band, it is considered to be oversold. Traders can use these signals to enter or exit trades, or to set stop-loss orders.
