What is a Bollinger Band?

Bollinger Bands® is a technical analysis tool to generate oversold or overbought signals and was developed by John Bollinger. Three lines compose Bollinger Bands: A simple moving average, or the middle band, and an upper and lower band.

Should you use Bollinger Bands with other indicators?

Traders are often inclined to use Bollinger Bands with other indicators to confirm price action. In particular, the use of oscillator-like Bollinger Bands will often be coupled with a non-oscillator indicator-like chart patterns or a trendline.

When is a Bollinger Band considered overbought?

The consensus is that when the price reaches the upper band, it is considered as overbought, and when the price approaches the lower band, it is deemed to be oversold. What are Bollinger Bands used for?

What does bandwidth mean in a Bollinger Band?

Bandwidth tells how wide the Bollinger Bands are on a normalized basis. Writing the same symbols as before, and middleBB for the moving average, or middle Bollinger Band: Using the default parameters of a 20-period look back and plus/minus two standard deviations, bandwidth is equal to four times the 20-period coefficient of variation .