Advanced Tools Plug-in:

BW - Bollinger Bandwidth Indicator

Bollinger Bands measure volatility by placing bands on either side of a moving average. These bands are charted two standard deviations away from the average, so as the average changes, the value of two standard deviations also changes. This value is what comprises the Bollinger Bandwidth, representing the expanding and contracting of the bands based on recent volatility.

During a period of rising price volatility, the distance between the two bands will widen (BB Width will increase). Conversely, during a period of low market volatility, the distance between the two bands will contract (BB Width will decrease).

The tendency is for the bands to alternate between expansion and contraction. When the bands are unusually far apart, this is often a sign that the current trend may be ending. When the distance between the two bands has narrowed, that is often a sign that a market may be about to begin a new trend.

Therefore, the Bollinger Bandwidth gives an indication of how wide the Bollinger Bands are as a function of the middle band. It is used to identify the squeeze at low values and the end of trends at high values.

Calculation

Bollinger Bandwidth = (Top Bollinger Band (x periods))-Bottom Bollinger Band (x periods))/ Simple Moving Average Close (x periods).