Bollinger Bands
A volatility indicator formed by a moving average and two bands that widen and narrow as the market becomes more or less agitated.
Bollinger Bands are a volatility indicator created by John Bollinger. They wrap price in three lines and show, at a glance, whether the market is calm or agitated.
The middle line is a moving average (usually 20 periods). The upper and lower bands sit two standard deviations away from the average. When volatility rises, the bands widen; when the market goes quiet, they narrow.
There are two main readings. The squeeze: when the bands narrow a lot, it often precedes a strong move — the market "builds up energy" before breaking out. And mean reversion: in sideways markets, price touching the upper band may be stretched up, and touching the lower band, stretched down, tending to return to the center.
Beware the classic mistake: touching a band is not an automatic reversal signal. In strong trends, like a crypto pair in an accelerating rally, price can "walk" along the upper band for several candles. That is why the bands work best combined with trend reading and oscillators like the RSI.