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Bollinger Lower (20)

Bollinger Lower (20)

The lower Bollinger band is the mid line minus a volatility buffer. Price touching it can point to strong downside or possible exhaustion.

How it relates

Bollinger Mid (20)The 20-period Bollinger middle line is usually a moving average of the price. It is the center of the Bollinger Band.−Bollinger Bandwidth (20)Bollinger bandwidth measures how wide the bands are relative to the middle line. Wider bands mean higher volatility.=Bollinger Lower (20)
(Closing PriceClosing price is the last traded price of the period. It's the most common reference price for charts and indicators.−Bollinger Lower (20))÷(Bollinger Upper (20)The upper Bollinger band is the mid line plus a volatility buffer. Price touching it can signal strong upside or possible overextension.−Bollinger Lower (20))=%B (Bollinger 20)%B shows where price sits between the lower and upper Bollinger bands. 0 means at the lower band, 1 at the upper band.

The lower Bollinger band is the mid line minus a volatility buffer. Price touching it can point to strong downside or possible exhaustion.

The calculation:

Lower Band = Middle Band - (2 × Standard Deviation of price over 20 periods)

What the lower band represents:

<ul>
  • Volatility boundary: Approximately 2 standard deviations below the mean
  • Statistical level: About 95% of price action should occur within the bands
  • Dynamic level: Expands in high volatility, contracts in low volatility

    • How to interpret:

    • Touching the band: Indicates strong selling pressure but also potential oversold conditions
    • Walking the band: In strong downtrends, prices can ride along the lower band
    • Breaking below: Unusual weakness; may indicate breakdown or capitulation
    • Reversing from band: Often signals short-term bounce opportunity

    Trading applications:

    • Entry points: Lower band can provide entry for mean reversion trades
    • Support level: Dynamic support that adjusts with volatility
    • Stop loss placement: Break below lower band can trigger stops
    • Capitulation signal: Sharp move below band may indicate selling climax

    The lower band is not a buy signal by itself. In strong downtrends, prices can persistently touch or exceed the lower band while continuing lower.