Definition of Bollinger Bands in finance

Bollinger Bands are a feature of a chart used in technical analysis to analyze volatility in a market. They are derived from the standard deviations away from the moving average price.

Wide Bollinger Bands indicate high volatility and narrow ones indicate a calm market (often followed by a period of high volatility). A very basic trading strategy is to sell when the price reaches the top Bollinger Band as the asset is likely to be overbought and then to buy when the price reaches the bottom Bollinger Band because the asset is oversold and underpriced.