The Bollinger BandWidth indicator quantifies the width of the Bollinger Bands. Bollinger Bands consist of a middle band, typically a simple moving average, surrounded by an upper and lower band representing a specified number of standard deviations from the middle band. The BandWidth is calculated by taking the difference between the upper and lower bands and dividing it by the middle band's value. Traders use the Bollinger BandWidth to gauge volatility. A high BandWidth suggests increased volatility, while a low BandWidth indicates decreased volatility. When BandWidth is at historically low levels, it may signal a period of consolidation or low volatility, potentially preceding a significant price movement. Conversely, a spike in BandWidth may suggest heightened market activity and the potential for a substantial price shift. Traders often use the Bollinger BandWidth in conjunction with other indicators to make more informed decisions about entry and exit points in the market.
