Bollinger Bands

Bollinger Bands is a technical indicator developed by John Bollinger in the 1980s, consisting of three lines: middle band (moving average), upper band, and lower band. Upper and lower bands are calculated based on standard deviation of price, dynamically adjusting to reflect market volatility. Bollinger Bands can simultaneously measure trend, volatility, and relative price levels.

Types

Bollinger Bands excel in ranging markets where counter-trend trades can be considered when price touches bands. In trending markets, breakouts after band squeeze often mark beginning of strong trends. Bollinger Band Width (BBW) quantifies volatility, helping select appropriate trading strategies. Many traders combine Bollinger Bands with RSI or MACD, seeking confirmation from other indicators when price touches band edges.