Assume a 5 bar Bollinger band with 2 Deviations, and assume the last five closes were 25.5, 26.75, 27.0, 26.5, and 27.25.
Calculate the simple moving average:
25.5 + 26.75 + 27.0 + 26.5 + 27.25 = 133.0
133.0 / 5 = 26.6
Next, for each bar, subtract 26.6 from the close and square this value:
| 25.5 - 26.6 = | -1.1 | squared = | 1.21 |
| 26.75 - 26.6 = | 0.15 | squared = | 0.023 |
| 27.0 - 26.6 = | 0.4 | squared = | 0.16 |
| 26.5 - 26.6 = | 0.1 | squared = | 0.01 |
| 27.25 - 26.6 = | 0.65 | squared = | 0.423 |
Add the above calculated values, divide by 5, and then get the square root of this value to get the deviation value:
1.21 + 0.023 + 0.16 + 0.01 + 0.423 = 1.826
1.826 / 5 = 0.365
Square root of .365 = 0.604
The upper Bollinger band would be 26.6 + (2 * 0.604) = 27.808
The middle Bollinger band would be 26.6
The lower Bollinger band would be 26.6 - (2 * 0.604) = 25.392