Volatility: bands, channels and VWAP
Bollinger, Keltner, Donchian, ATR, standard deviation and VWAP bands.
These indicators measure how much price moves and draw “rails” around it: they help you tell whether a move is normal or excessive.
The bands and channels
- Bollinger Bands, an average with two bands set at a distance equal to statistical volatility. Wide bands = a moving market, narrow = a calm one (often just before a burst). Price touching the outer band = an extended move.
- Keltner Channels, similar, but the bands use the ATR (the average trading range). Steadier in nervous phases.
- Donchian Channels, the high and low of the last N periods: they show where the recent highs/lows are, useful for breakouts.
The volatility measures
- ATR (Average True Range), the average trading range: how much “room” price covers on average. The basis for sizing stops and targets.
- Standard Deviation, the standard deviation of price, that is, how far it strays from its own average.
VWAP bands
VWAP is the session’s volume-weighted average price; the σ bands add lanes at one, two and three deviations.
- How to read it: VWAP is a closely watched “session” reference; touching the outer band means price is far from the average, and a return is possible.
Common parameters
Period (how many candles), band multiplier/width and colours.