Bollinger Bands
A moving average with upper and lower bands plotted a set number of standard deviations away, widening and narrowing as volatility changes.
Bollinger Bands, developed by John Bollinger, consist of a middle simple moving average with an upper and lower band plotted a set number of standard deviations away from it — commonly 2 — so the bands automatically widen during volatile periods and narrow during calm ones.
A period of unusually narrow bands (commonly called a "squeeze") is often watched as a sign that a larger price move may be approaching, though the bands themselves don't indicate which direction that move will go. See Kaavon's dedicated Bollinger Bands article for the full calculation.
Examples
- A Bollinger Band "squeeze" — unusually narrow bands — is commonly watched as a sign of low volatility that may precede a larger price move.
- Price touching the upper Bollinger Band isn't automatically a sell signal — during a strong trend, price can ride along a band for an extended period.
Learn more
Bollinger Bands
Read the article
Keltner Channels
Read the Keltner Channels glossary definition
Standard Deviation (as a Volatility Indicator)
Read the Standard Deviation (as a Volatility Indicator) glossary definition
Bollinger Band Squeeze
Read the Bollinger Band Squeeze glossary definition