Bollinger Band
📈 Investing
Quick Definition
Bollinger Bands are a technical analysis tool used to determine overbought or oversold conditions in a market. They consist of a middle band being a simple moving average, flanked by two standard deviation lines.
Formula
Middle Band = 20-day simple moving average (SMA)
Upper Band = Middle Band + (2 * standard deviation of price)
Lower Band = Middle Band - (2 * standard deviation of price)Examples
- 1A stock trading outside its Bollinger Band might indicate a potential reversal in its price trend.
- 2During a period of high market volatility, the bands widen, which can help traders adjust their risk management strategies.
- 3Traders might use Bollinger Bands in conjunction with other indicators like the Relative Strength Index (RSI) to confirm trading signals.
Tags
Bollinger Bandstechnical analysistradingstock marketvolatilityinvestment strategies
Related Terms
Other terms you might find helpful
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements, typically used to identify overbought or oversold conditions in a market.
Stock Market
The stock market is a collection of markets where stocks (shares of ownership in businesses) are bought, sold, and issued, reflecting the economic trends and the performance of companies.
Technical Analysis
Technical analysis is a method used to evaluate and predict future prices of securities based on historical price and volume data.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/17/2025