We generally prefer to choose ‘exponential’ as our moving average type in the settings of Bollinger Bands Indicator because it reacts quickly to the newest data points. In fact here are the whole settings once again –
Field – Close Period – 20 Standard Deviations – 2 Moving Average Type – Exponential Channel Fill – Yes So coming to the definition of Bollinger bands. Here is how it is calculated if you abide by the settings above –
Middle Band = 20-day exponential moving average (EMA) Upper Band = 20-day EMA + (20-day standard deviation of price x 2) Lower Band = 20-day EMA – (20-day standard deviation of price x 2)