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Bollinger Band

a technical analysis tool developed by John Bollinger for generating oversold or overbought signals

A Bollinger Band is a technical analysis tool defined by a set of trendlines plotted two standard deviations (positively and negatively) away from a simple moving average (SMA) of a security’s price, but which can be adjusted to user preferences.

Bollinger Bands® were developed and copyrighted by famous technical trader John Bollinger, designed to discover opportunities that give investors a higher probability of properly identifying when an asset is oversold or overbought.

There are three lines that compose Bollinger Bands: A simple moving average (middle band) and an upper and lower band.

The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average, but can be modified.

Bollinger Bands® are a highly popular technique. Many traders believe the closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.

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