Bollinger Band

What does bollinger band mean?

Bollinger bands are a popular technical analysis tool to determine when markets are overbought and oversold. They consist of a midline, usually a 21 day moving average, and two additional lines that are each two standard deviations away from the simple moving average.

This creates a channel, and if market volatility increases the channel widens, and when market volatility decreases the channel narrows.

Some traders believe that as price approaches the upper line, or band, it means the market is overbought, and when price approaches the lower line, or band, the market is oversold.

Bollinger bands are names for the famous technical trader John Bollinger, who created the technical analysis tool in the early 1980s.