Bollinger Bands are a technical analysis tool developed by John Bollinger in the early 1980s. The bands consist of a simple moving average (SMA) and two standard deviation lines (upper and lower) that are plotted at a certain number of standard deviations away from the SMA. The distance between the upper and lower bands varies with volatility. When the market is less volatile, the bands will be closer together, and when the market is more volatile, the bands will be farther apart.
The Bollinger Bands are used to measure volatility in the market. When the market is volatile, the prices are likely to be moving around more and the Bollinger Bands will be farther apart. When the market is less volatile, the prices will be moving around less and the Bollinger Bands will be closer together. Bollinger Bands can also be used to generate buy and sell signals. When the price of an asset moves outside of the Bollinger Bands, it can be a sign that the asset is overbought or oversold and may be due for a price correction.
Bollinger Bands are popular volatility indicators and it can be used along with other indicators to confirm the signals. They are widely used in stock market, forex, commodities and other markets.
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