{{tag>volatility}}

====== Bollinger Bands ======

   * Bollinger Bands are a type of price envelope[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * Price envelopes define upper and lower price range levels[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * envelopes plotted at a standard deviation level above and below a simple moving average[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * The default values are 20 for period, and 2 for standard deviations[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * help determine whether prices are high or low on a relative basis[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * the pair of bands is not intended to be used on its own. Use the pair to confirm signals given with other indicators[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]

===== How this indicator works =====

   * When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction. This may begin a trending move.[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * ⚠️ Watch out for a false move in opposite direction which reverses before the proper trend begins
   * When the bands separate by an unusual large amount, volatility increases and any existing trend may be ending.[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * Prices have a tendency to bounce within the bands' envelope, touching one band then moving to the other band. You can use these swings to help identify potential profit targets. For example, if a price bounces off the lower band and then crosses above the moving average, the upper band then becomes the profit target.[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * Price can exceed or hug a band envelope for prolonged periods during strong trends. On divergence with a momentum oscillator, you may want to do additional research to determine if taking additional profits is appropriate for you.[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]
   * A strong trend continuation can be expected when the price moves out of the bands. However, if prices move immediately back inside the band, then the suggested strength is negated.[([[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]])]

===== External Links =====

  * [[https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/bollinger-bands|fidelity.com/bollinger-bands]]