Bollinger Band

A Bollinger Band is a volatility indicator, not just a static price channel: its width automatically expands and contracts as the market gets more or less volatile. It was developed in the early 1980s by trader John Bollinger, who wanted a band that adapted to changing conditions instead of tracking price at a fixed distance.

The upper and lower lines are not arbitrary multiples of the moving average; they are set a chosen number of standard deviations (typically two) away from it, so they measure how far price is straying from its recent average. When a market is calm, the bands squeeze tightly together; when volatility spikes, they widen sharply. Traders watch for a prolonged "squeeze" as a sign that a big move may be building, since low volatility tends to precede high volatility. Statistically, roughly 95% of price action stays within the two-standard-deviation bands, so a decisive close outside them is often read as a significant, if not necessarily directional, event.

On a candlestick chart, price repeatedly touching or riding the upper band can suggest an overbought, strongly trending market, while hugging the lower band can suggest oversold conditions. Because the bands say nothing about direction on their own, most crypto traders pair them with volume or momentum indicators to confirm whether a breakout is genuine, especially on lower-liquidity altcoins where thin order books can produce misleading band touches.