The next variety of the support/resistance indicator examined will be the Bollinger band.

The Bollinger band indicator has three moving average lines displayed. The center one shows the selected moving average value and the upper and lower lines represent prices that are a selected number of standard deviations above or below the moving average.

The net effect of using a trading platform to display Bollinger bands is to produce what appears to the eye as a river or stream. The upper and lower lines represent the banks and the center moving average line is the current. Just as with a river, currency pair prices are usually confined inside the banks. When the banks are close together and traversing the chart horizontally, prices will be stable. When the banks turn up or down or expand in their distance from one another, prices will trend. When prices break the banks violently, there is a potential for a significant move. The substantial volume of the forex market, where huge amounts of money and millions of traders are present, usually combine to make any break of the upper or lower lines very brief.

Most traders who use the Bollinger band indicator use the default values for the moving average and number of standard deviations. On many trading platforms, the setting is a moving average of 14 with two standard deviations. Bollinger bands are visually appealing and give some indication of whether a market is volatile or quiet.