Bollinger Bands
Trend Indicator
Bollinger Bands
Bollinger Bands consist of a middle band with two outer bands that measure volatility.
Overview
Bollinger Bands adapt to market conditions. When markets become more volatile, the bands widen; during less volatile periods, they contract. Price touching the outer bands can signal overbought or oversold conditions.
Use Case
Effective for identifying volatility, potential reversals, and overbought/oversold conditions.
Calculation
Upper Band = SMA + (2 × Standard Deviation), Lower Band = SMA - (2 × Standard Deviation)