In plain English
What Bollinger Bands means
The middle line is usually a 20-period moving average. The outer bands expand when price volatility rises and contract when volatility falls. Because the bands change with volatility, they are often used to compare whether price is relatively stretched or compressed.
Why it matters
Bollinger Bands help traders see when volatility is unusually high or low and when price may be trading near an outer boundary. They are descriptive, not predictive, and can stay “overbought” or “oversold” for long periods in a trend.
Example
If a 20-period average is 100 and the standard deviation is 2, then bands set at two standard deviations would be 104 and 96. This is simplified, but it shows how the width changes with volatility.
Quick answers
Common questions
What do Bollinger Bands measure?+
They measure volatility around a moving average using bands based on standard deviation.
Are Bollinger Bands a trading signal on their own?+
No. They are a chart tool for context, not a standalone signal.
Sources