Bollinger Bands
MetaStock Indicator

"Trading bands are one of the most powerful concepts available to the technically based investor, but they do not, as is commonly believed, give absolute buy and sell signals based on price touching the bands. What they do is answer the perennial question of whether prices are high or low on a relative basis. Armed with this information, an intelligent investor can make buy and sell decisions by using indicators to confirm price action.

But before we begin, we need a definition of what we are dealing with. Trading bands are lines plotted in and around the price structure to form an ''envelope". It is the action of prices near the edges of the envelope that we are particularly interested in…."

-- Taken from Stocks & Commodities, V. 10:2 (47-51): Using Bollinger Bands by John Bollinger

For further interpretation refer to the above article found in the February 1992 issue of Technical Analysis of Stocks and Commodities.

Bollinger Bands are built into MetaStock, however you may prefer to use the individual custom formulas.

The custom formulas for the components of the Bollinger Bands are as follows: