Bollinger Bands
Also called: Bollinger, Bollinger bands, price bands.
Formula
Middle = sum of 20 closes / 20. Variance = sum of each squared distance from the middle / 20. Standard deviation = square root of variance. Upper = middle + 2 x standard deviation. Lower = middle - 2 x standard deviation. This uses population variance, with 20 as the divisor.
How it is read
The first 19 reached closes do not make a full window, so the desk leaves those readings empty. A missing close starts a new 20-close warm-up. With identical closes, the spread is zero and all 3 lines meet. As a small worked example, closes 1, 2 and 3 have average 2 and population variance 2/3. A 3-candle band at width 2 is about 0.367 to 3.633. The actual desk setting uses 20 closes. A forming close can change the current bands.
What it does not tell you
A touch of a band does not prove a turn is near. Price can keep moving along or outside a band. A narrow spread does not reveal when a larger move will arrive or which way it will go. These bands use past closes, rather than a forecast or a probability range. Changing the candle interval changes the input prices and therefore the bands. Keep the same settings when comparing them. They do not include option decay, spreads, charges or fill quality.
Related concepts
Watch candles on the practice desk
Open the NIFTY and BANKNIFTY practice desk. Compare the chart with the idea explained here.