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Volatility Bands is based on the concept of Bollinger Bands. The difference is that volatility is used as the bands instead of standard deviation. It allows users to compare volatility and relative price levels over a period time. The indicator consists of three bands designed to encompass most of the security's price action. Volatility Bands are plotted at volatility levels above and below a moving average. A distinct characteristic of Volatility Bands is how the spacing between bands varies based on the volatility of prices.
Like Bollinger Bands, the bands are self-adjusting: widening during volatile markets and contracting during calmer or trending periods. Volatility bands can help confirm trend, but they do not determine the future direction of a security.
In an uptrend when price reaches the lower band buy position can be opened. In down trend, when price reach the band top sell is recommended.
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