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Calculated Shard: 148 (from laksa137)

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curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/technical/102201.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/technical/102201.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/articles\/technical\/102201.asp","crawl_time":1776670243,"first_indexed_time":1510688400,"http_code":200,"src_unparsed":"com,investopedia!www,\/articles\/technical\/102201.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"Understanding and Using Bollinger Bands® in Trading","meta_descriptions":["Learn how Bollinger Bands® can help identify market trends and spot buying or selling opportunities with this essential tool for technical analysis."],"attrs_boilerpipe_text":"Key Takeaways\nBollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction.\nThe bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations.\nPrices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition.\nTraders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points.\nBollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool.\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\nBollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals.\nSean Anthony Eddy \/ Getty Images\nHow Bollinger Bands® Work\nBollinger Bands®\nhave a centerline with two bands, one above and one below. The centerline is usually a\nsimple moving average\n, and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns.\nA stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend.\nWe know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with\nsupport\nand\nresistance\nlines to predict stock price movement\nImportant\nTechnical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities.\nHow to Use Support and Resistance Lines with Bollinger Bands®\nTraders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met.\nStock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals.\nWhen using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper\nprice target\n. In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside.\nReal-World Examples of Bollinger Bands® in Action\nThe chart below is of American Express (\nAXP\n) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the $60 level in the dead of winter to its March position of around $10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken.\nImage by Sabrina Jiang © Investopedia 2020 \nIn the 2001 chart of Microsoft (\nMSFT\n) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from $20 to $24 and then on to between $24 and $25 before some traders would have confirmation of this trend reversal.\nImage by Sabrina Jiang © Investopedia 2020\nThis is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators.\nWhat Are Bollinger Bands®?\nBollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band.\nWhat Do Bollinger Bands® Tell You?\nBollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band.\nAre There Any Limitations to Bollinger Bands®?\nYes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands®\nshould be used with other non-correlated indicators\n. Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data.\nThe Bottom Line\nBollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/articles\/technical\/102201.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/articles\/technical\/102201.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - 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She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder.\n\nLearn about our  [Financial Review Board](https:\/\/www.investopedia.com\/investopedia-financial-review-board-5076269)\n\nFact checked by\n\n[Yarilet Perez](https:\/\/www.investopedia.com\/yarilet-perez-5078533)\n\n![Yarilet Perez]()\n\n![Yarilet Perez](https:\/\/www.investopedia.com\/thmb\/cEF2qOX7iOQUm6i7wsIW7l6w0qo=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/YariletPerez-d2289cb01c3c4f2aabf79ce6057e5078.jpg)\n\nFact checked by Yarilet Perez\n\n[Full Bio](https:\/\/www.investopedia.com\/yarilet-perez-5078533)\n\nYarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n### Key Takeaways\n- Bollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction.\n- The bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations.\n- Prices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition.\n- Traders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points.  \n  Bollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n\nBollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals.\n\n![Two women looking at a smartphone and computer screen with financial market information on them.]()\n\n![Two women looking at a smartphone and computer screen with financial market information on them.](https:\/\/www.investopedia.com\/thmb\/HQteU7GCe4-ZMXs1wamrhjSX7v4=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/INV_Top_TechStocks_GettyImages-1497891443-e625ec683d644fdbaf0a89ec41860807.jpg)\n\nSean Anthony Eddy \/ Getty Images\n## How Bollinger Bands® Work\n[Bollinger Bands®](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp) have a centerline with two bands, one above and one below. The centerline is usually a [simple moving average](https:\/\/www.investopedia.com\/terms\/s\/sma.asp), and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns.\n\nA stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend.\n\nWe know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with [support](https:\/\/www.investopedia.com\/terms\/s\/support.asp) and [resistance](https:\/\/www.investopedia.com\/terms\/r\/resistance.asp) lines to predict stock price movement\n\n### Important\nTechnical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities.\n### How to Use Support and Resistance Lines with Bollinger Bands®\nTraders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met.\n\nStock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals.\n\nWhen using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper [price target](https:\/\/www.investopedia.com\/terms\/p\/pricetarget.asp). In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside.\n\n## Real-World Examples of Bollinger Bands® in Action\nThe chart below is of American Express ([AXP](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=axp)) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the \\$60 level in the dead of winter to its March position of around \\$10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken.\n\n![Image]()\n\n![Image](https:\/\/www.investopedia.com\/thmb\/ZnsvaRGYWp_6GXSV_si5We6ElKE=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_The_Basics_of_Bollinger_Bands_Oct_2020-01-e7bbae2539c047a9b33e0fcd975c00e3.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nIn the 2001 chart of Microsoft ([MSFT](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=msft)) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from \\$20 to \\$24 and then on to between \\$24 and \\$25 before some traders would have confirmation of this trend reversal.\n\n![Image]()\n\n![Image](https:\/\/www.investopedia.com\/thmb\/34KyJH0vizOu9-9v-cO4ev_GCt8=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_The_Basics_of_Bollinger_Bands_Oct_2020-02-0e1fa8e23f7b422c90e1106c956f28b9.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nThis is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators.\n\n## What Are Bollinger Bands®?\nBollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band.\n\n## What Do Bollinger Bands® Tell You?\nBollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band.\n\n## Are There Any Limitations to Bollinger Bands®?\nYes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands® [should be used with other non-correlated indicators](https:\/\/www.investopedia.com\/ask\/answers\/121014\/how-do-i-create-trading-strategy-bollinger-bands-and-relative-strength-indicator-rsi.asp). Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data.\n## The Bottom Line\nBollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. Bollinger Bands®. \"[Bollinger Bands Rules](https:\/\/www.bollingerbands.com\/bollinger-band-rules).\"\n\nRead more\n\n- [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n- [Technical Analysis](https:\/\/www.investopedia.com\/technical-analysis-4689657)\n- [Technical Analysis Basic Education](https:\/\/www.investopedia.com\/technical-analysis-basic-education-4689655)\n\nPartner Links\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\n## Related Articles\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/_NV8SX_2MmQ6wCDYaz7j6dbrZUA=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/147688989-5bfc2b9c46e0fb0051bde36d.jpg) Rounding Top: What It Is and How It's Used](https:\/\/www.investopedia.com\/terms\/r\/roundingtop.asp)\n\n[![Three business people sit at a conference table in front of an electronic wall chart.]() ![Three business people sit at a conference table in front of an electronic wall chart.](https:\/\/www.investopedia.com\/thmb\/VY3wVbqD76UVVwSN5yUfjJIWklY=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/activetrading14-5bfc2b9bc9e77c00263066bb.jpg) Negative Volume Index (NVI): Meaning, Overview, Calculations](https:\/\/www.investopedia.com\/terms\/n\/nvi.asp)\n\n[![Hand of a Stock Broker Analyzing Line Graph]() ![Hand of a Stock Broker Analyzing Line Graph](https:\/\/www.investopedia.com\/thmb\/1jC1emmKjfq-tx-x2ZqGsMc4gWs=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-932632556-cbcd0074d6a643cabf466442e2aab705.jpg) What is a Swing? 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Stock Broker](https:\/\/www.investopedia.com\/terms\/s\/stock-trader.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/yP6E7CCv2WVFsIH6P1scYsGOsec=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/shutterstock_67023106-5bfc2b9846e0fb005144dd87.jpg) Find Correlation Between Market Indicators and Stocks Easily](https:\/\/www.investopedia.com\/ask\/answers\/032315\/how-do-i-calculate-correlation-between-market-indicators-and-specific-stocks.asp)\n\n[![Illustration and photo composite of a person with short hair writing on a tablet with a stylus. ]() ![Illustration and photo composite of a person with short hair writing on a tablet with a stylus. ](https:\/\/www.investopedia.com\/thmb\/5rdj-T5MAPb8AENt-QnSNp6fJD0=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/MarketCyclesTheKeytoMaximumReturns_final-1c028242cf9c464bb0a5970d906f07e9.png) Navigating Market Cycles: The Surprising Strategy for Optimized Returns](https:\/\/www.investopedia.com\/trading\/market-cycles-key-maximum-returns\/)\n\n[![Digital stock chart]() ![Digital stock chart](https:\/\/www.investopedia.com\/thmb\/Wr3066-JYFe1ojmSpc-7ukZk_kg=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/shutterstock_112522391-5bfc2b9846e0fb0051bde2d3.jpg) Intraday Momentum Index Explained: Key Uses and Insights](https:\/\/www.investopedia.com\/terms\/i\/intraday-momentum-index-imi.asp)\n\n[![Stock trader points to a screen displaying trade volumes rising and falling.]() ![Stock trader points to a screen displaying trade volumes rising and falling.](https:\/\/www.investopedia.com\/thmb\/a4_KMdAakaJlnrz2G65b1wBEi4o=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/TradeVolumeIndex-d97dcddc6d5e4821a2f8ecde1267e5dc.jpg) What Is the Trade Volume Index (TVI)?](https:\/\/www.investopedia.com\/terms\/t\/tradevolumeindex.asp)\n\n[![Midsection Businessmen Analyzing Charts on Laptop in Office]() ![Midsection Businessmen Analyzing Charts on Laptop in Office](https:\/\/www.investopedia.com\/thmb\/4y5B7-a5_QzQ4PzsQc7k-RHjyR8=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1128046391-b27ab3652103489ab9d3a36a58709fea.jpg) Is a Negative Alpha Always a Signal to Sell Your Stock?](https:\/\/www.investopedia.com\/ask\/answers\/021015\/does-negative-alpha-automatically-mean-i-should-sell.asp)\n\n[![]() ![](https:\/\/www.investopedia.com\/thmb\/21FZziAWtgU8atAgNu2CdTpf0aI=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/fxipointandfigure-5bfc2e16c9e77c00587783eb.png) Pinpoint Profitable Breakouts with Point-and-Figure Patterns](https:\/\/www.investopedia.com\/articles\/trading\/07\/point-figure.asp)\n\n[![Stock chart price pattern rebound]() ![Stock chart price pattern rebound](https:\/\/www.investopedia.com\/thmb\/10yYOBobj3IKgSleAwa9JCb4qcs=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/stock-chart-price-pattern-rebound-629027736-3503c1eb418147539717d7fe897b51d3.jpg) An Overview of Triple Exponential Average (TRIX) Indicator](https:\/\/www.investopedia.com\/terms\/t\/trix.asp)\n\n[![A close-up of a woman's hands using a calculator, while she sits at a desk with several documents displaying financial charts. ]() ![A close-up of a woman's hands using a calculator, while she sits at a desk with several documents displaying financial charts. ](https:\/\/www.investopedia.com\/thmb\/Q0SyQbLKCLQEuEok8L5p5CuYfDU=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-2124055337-cd8340a38ab04b32860aa71dea422d30.jpg) How Much Capital Do You Need to Start Trading? Essential Tips](https:\/\/www.investopedia.com\/ask\/answers\/08\/minimum-amounts-of-money-to-start-trading.asp)\n\n[![stock market]() ![stock market](https:\/\/www.investopedia.com\/thmb\/bgyj09pyXmvCk1Hbp9h3RVDhk8I=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/stock-market-836262076-98a3b5ebf8394b6295b51d45b807944b.jpg) Chartered Market Technician (CMT): Exam Guide & Career Benefits](https:\/\/www.investopedia.com\/terms\/c\/cmt.asp)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Newsletter Sign Up](https:\/\/www.investopedia.com\/articles\/technical\/102201.asp)\n\nFollow Us\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n- [Simulator](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n- [Banking](https:\/\/www.investopedia.com\/banking-4427754)\n- [Personal Finance](https:\/\/www.investopedia.com\/personal-finance-4427760)\n- [Economy](https:\/\/www.investopedia.com\/economy-4689801)\n- [Reviews](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n- [Dictionary](https:\/\/www.investopedia.com\/financial-term-dictionary-4769738)\n\n- [About Us](https:\/\/www.investopedia.com\/about-us-5093223)\n- [Editorial Process](https:\/\/www.investopedia.com\/legal-4768893#toc-editorial-policy)\n- [Careers](https:\/\/www.people.inc\/careers)\n- [Contact Us](https:\/\/support.investopedia.com\/contactus)\n- [Privacy Policy](https:\/\/www.people.inc\/brands-privacy)\n- [Terms of Service](https:\/\/www.people.inc\/brands-termsofservice)\n- [Advertise](https:\/\/www.people.inc\/advertising)\n\n- [\\#](https:\/\/www.investopedia.com\/terms-beginning-with-num-4769350)\n- [A](https:\/\/www.investopedia.com\/terms-beginning-with-a-4769351)\n- [B](https:\/\/www.investopedia.com\/terms-beginning-with-b-4769352)\n- [C](https:\/\/www.investopedia.com\/terms-beginning-with-c-4769353)\n- [D](https:\/\/www.investopedia.com\/terms-beginning-with-d-4769354)\n- [E](https:\/\/www.investopedia.com\/terms-beginning-with-e-4769355)\n- [F](https:\/\/www.investopedia.com\/terms-beginning-with-f-4769356)\n- [G](https:\/\/www.investopedia.com\/terms-beginning-with-g-4769357)\n- [H](https:\/\/www.investopedia.com\/terms-beginning-with-h-4769358)\n- [I](https:\/\/www.investopedia.com\/terms-beginning-with-i-4769359)\n- [J](https:\/\/www.investopedia.com\/terms-beginning-with-j-4769360)\n- [K](https:\/\/www.investopedia.com\/terms-beginning-with-k-4769361)\n- [L](https:\/\/www.investopedia.com\/terms-beginning-with-l-4769362)\n- [M](https:\/\/www.investopedia.com\/terms-beginning-with-m-4769363)\n- [N](https:\/\/www.investopedia.com\/terms-beginning-with-n-4769364)\n- [O](https:\/\/www.investopedia.com\/terms-beginning-with-o-4769365)\n- [P](https:\/\/www.investopedia.com\/terms-beginning-with-p-4769366)\n- [Q](https:\/\/www.investopedia.com\/terms-beginning-with-q-4769367)\n- [R](https:\/\/www.investopedia.com\/terms-beginning-with-r-4769368)\n- [S](https:\/\/www.investopedia.com\/terms-beginning-with-s-4769369)\n- [T](https:\/\/www.investopedia.com\/terms-beginning-with-t-4769370)\n- [U](https:\/\/www.investopedia.com\/terms-beginning-with-u-4769371)\n- [V](https:\/\/www.investopedia.com\/terms-beginning-with-v-4769372)\n- [W](https:\/\/www.investopedia.com\/terms-beginning-with-w-4769373)\n- [X](https:\/\/www.investopedia.com\/terms-beginning-with-x-4769374)\n- [Y](https:\/\/www.investopedia.com\/terms-beginning-with-y-4769375)\n- [Z](https:\/\/www.investopedia.com\/terms-beginning-with-z-4769376)\n\nInvestopedia is part of the [People Inc.](https:\/\/www.people.inc\/) publishing family.\n\nNewsletter Sign Up\n\nNewsletter Sign Up","attrs_readable_markdown":"### Key Takeaways\n- Bollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction.\n- The bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations.\n- Prices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition.\n- Traders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points.  \n  Bollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nBollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals.\n\nSean Anthony Eddy \/ Getty Images\n\n## How Bollinger Bands® Work\n[Bollinger Bands®](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp) have a centerline with two bands, one above and one below. The centerline is usually a [simple moving average](https:\/\/www.investopedia.com\/terms\/s\/sma.asp), and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns.\n\nA stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend.\n\nWe know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with [support](https:\/\/www.investopedia.com\/terms\/s\/support.asp) and [resistance](https:\/\/www.investopedia.com\/terms\/r\/resistance.asp) lines to predict stock price movement\n\n### Important\nTechnical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities.\n### How to Use Support and Resistance Lines with Bollinger Bands®\nTraders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met.\n\nStock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals.\n\nWhen using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper [price target](https:\/\/www.investopedia.com\/terms\/p\/pricetarget.asp). In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside.\n\n## Real-World Examples of Bollinger Bands® in Action\nThe chart below is of American Express ([AXP](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=axp)) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the \\$60 level in the dead of winter to its March position of around \\$10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nIn the 2001 chart of Microsoft ([MSFT](https:\/\/www.investopedia.com\/markets\/quote?tvwidgetsymbol=msft)) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from \\$20 to \\$24 and then on to between \\$24 and \\$25 before some traders would have confirmation of this trend reversal.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nThis is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators.\n\n## What Are Bollinger Bands®?\nBollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band.\n\n## What Do Bollinger Bands® Tell You?\nBollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band.\n\n## Are There Any Limitations to Bollinger Bands®?\nYes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands® [should be used with other non-correlated indicators](https:\/\/www.investopedia.com\/ask\/answers\/121014\/how-do-i-create-trading-strategy-bollinger-bands-and-relative-strength-indicator-rsi.asp). Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data.\n## The Bottom Line\nBollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions.","meta_canonical":null}

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Boilerpipe Text	Key Takeaways Bollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction. The bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations. Prices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition. Traders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points. Bollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool. Get personalized, AI-powered answers built on 27+ years of trusted expertise. Bollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals. Sean Anthony Eddy / Getty Images How Bollinger Bands® Work Bollinger Bands® have a centerline with two bands, one above and one below. The centerline is usually a simple moving average , and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns. A stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend. We know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with support and resistance lines to predict stock price movement Important Technical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities. How to Use Support and Resistance Lines with Bollinger Bands® Traders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met. Stock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals. When using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper price target . In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside. Real-World Examples of Bollinger Bands® in Action The chart below is of American Express ( AXP ) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the $60 level in the dead of winter to its March position of around $10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken. Image by Sabrina Jiang © Investopedia 2020 In the 2001 chart of Microsoft ( MSFT ) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from $20 to $24 and then on to between $24 and $25 before some traders would have confirmation of this trend reversal. Image by Sabrina Jiang © Investopedia 2020 This is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators. What Are Bollinger Bands®? Bollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band. What Do Bollinger Bands® Tell You? Bollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band. Are There Any Limitations to Bollinger Bands®? Yes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands® should be used with other non-correlated indicators . Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data. The Bottom Line Bollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions.
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Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ### Key Takeaways - Bollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction. - The bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations. - Prices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition. - Traders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points. Bollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ASK Bollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals. ![Two women looking at a smartphone and computer screen with financial market information on them.]() ![Two women looking at a smartphone and computer screen with financial market information on them.](https://www.investopedia.com/thmb/HQteU7GCe4-ZMXs1wamrhjSX7v4=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/INV_Top_TechStocks_GettyImages-1497891443-e625ec683d644fdbaf0a89ec41860807.jpg) Sean Anthony Eddy / Getty Images ## How Bollinger Bands® Work [Bollinger Bands®](https://www.investopedia.com/terms/b/bollingerbands.asp) have a centerline with two bands, one above and one below. The centerline is usually a [simple moving average](https://www.investopedia.com/terms/s/sma.asp), and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns. A stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend. We know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with [support](https://www.investopedia.com/terms/s/support.asp) and [resistance](https://www.investopedia.com/terms/r/resistance.asp) lines to predict stock price movement ### Important Technical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities. ### How to Use Support and Resistance Lines with Bollinger Bands® Traders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met. Stock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals. When using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper [price target](https://www.investopedia.com/terms/p/pricetarget.asp). In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside. ## Real-World Examples of Bollinger Bands® in Action The chart below is of American Express ([AXP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=axp)) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the \$60 level in the dead of winter to its March position of around \$10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken. ![Image]() ![Image](https://www.investopedia.com/thmb/ZnsvaRGYWp_6GXSV_si5We6ElKE=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_The_Basics_of_Bollinger_Bands_Oct_2020-01-e7bbae2539c047a9b33e0fcd975c00e3.jpg) Image by Sabrina Jiang © Investopedia 2020 In the 2001 chart of Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=msft)) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from \$20 to \$24 and then on to between \$24 and \$25 before some traders would have confirmation of this trend reversal. ![Image]() ![Image](https://www.investopedia.com/thmb/34KyJH0vizOu9-9v-cO4ev_GCt8=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_The_Basics_of_Bollinger_Bands_Oct_2020-02-0e1fa8e23f7b422c90e1106c956f28b9.jpg) Image by Sabrina Jiang © Investopedia 2020 This is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators. ## What Are Bollinger Bands®? Bollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band. ## What Do Bollinger Bands® Tell You? Bollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band. ## Are There Any Limitations to Bollinger Bands®? Yes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands® [should be used with other non-correlated indicators](https://www.investopedia.com/ask/answers/121014/how-do-i-create-trading-strategy-bollinger-bands-and-relative-strength-indicator-rsi.asp). Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data. ## The Bottom Line Bollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions. Get personalized, AI-powered answers built on 27+ years of trusted expertise. 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Readable Markdown	### Key Takeaways - Bollinger Bands® use a moving average with two price bands above and below, indicating volatility through expansion and contraction. - The bands consist of a centerline, typically a simple moving average, and two price channels representing standard deviations. - Prices touching the upper band can signal an overbought market, while touches to the lower band may indicate an oversold condition. - Traders use Bollinger Bands® to set price targets; the upper and lower bands are often considered potential market turning points. Bollinger Bands® should be used alongside other indicators as they are not reliable as a standalone tool. Get personalized, AI-powered answers built on 27+ years of trusted expertise. Bollinger Bands® were developed by John Bollinger to help traders analyze market trends. They consist of a centerline, a moving average, and two price channels that sit above and below it to reflect market volatility. Traders use them to identify potential overbought or oversold conditions, helping forecast possible price movements. These bands are often used with other technical indicators for more accuracy, providing a better picture of market conditions and stronger signals. Sean Anthony Eddy / Getty Images ## How Bollinger Bands® Work [Bollinger Bands®](https://www.investopedia.com/terms/b/bollingerbands.asp) have a centerline with two bands, one above and one below. The centerline is usually a [simple moving average](https://www.investopedia.com/terms/s/sma.asp), and the bands are standard deviations of the stock. The bands widen with volatility and contract in tight trading patterns. A stock may trade for long periods in a trend, albeit with some volatility from time to time. Traders use the moving average to better see the trend in price action. This way, they can gather important information about how the market is moving. For example, after a sharp trend change, the market may consolidate and trade narrowly around the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend. We know that markets trade erratically on a daily basis, even though they are still trading in an uptrend or downtrend. Technicians use moving averages with [support](https://www.investopedia.com/terms/s/support.asp) and [resistance](https://www.investopedia.com/terms/r/resistance.asp) lines to predict stock price movement ### Important Technical analysis is a trading strategy that analyzes statistical trends to identify trading opportunities. ### How to Use Support and Resistance Lines with Bollinger Bands® Traders draw upper resistance and lower support lines to form expected price channels. Some traders connect price tops or bottoms to set upper and lower limits, then draw parallel lines to define the price channel. If prices stay within this channel, traders can be confident that their expectations are met. Stock prices that touch the upper band are seen as overbought, while those touching the lower band are seen as oversold, triggering buy signals. When using Bollinger Bands®, treat the upper and lower bands as price targets. If the price deflects off the lower band and crosses above the 20-day average (the middle line), the upper band comes to represent the upper [price target](https://www.investopedia.com/terms/p/pricetarget.asp). In a strong uptrend, prices usually fluctuate between the upper band and the 20-day moving average. When that happens, a cross below the 20-day moving average warns of a trend reversal to the downside. ## Real-World Examples of Bollinger Bands® in Action The chart below is of American Express ([AXP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=axp)) from the start of 2008. You can see that for the most part, the price action was touching the lower band and the stock price fell from the \$60 level in the dead of winter to its March position of around \$10. In a couple of instances, the price action cut through the centerline (March to May and again in July and August), but for many traders, this was certainly not a buy signal as the trend wasn't broken. Image by Sabrina Jiang © Investopedia 2020 In the 2001 chart of Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=msft)) below, you can see the trend reversed to an uptrend in the early part of January. But take a look at how slow it was in showing the trend change. Before the price action crossed over the centerline, the stock price moved from \$20 to \$24 and then on to between \$24 and \$25 before some traders would have confirmation of this trend reversal. Image by Sabrina Jiang © Investopedia 2020 This is not to say that Bollinger Bands® aren't a well-regarded indicator of overbought or oversold issues, but charts like the 2001 Microsoft layout are a good reminder that we should start out by recognizing trends and simple moving averages before moving on to more exotic indicators. ## What Are Bollinger Bands®? Bollinger Bands® are tools used in technical analysis. They were designed by John Bollinger, a technical trader. The bands are used to generate signals for securities that are oversold or overbought. The bands are composed of different lines that are plotted on a chart, including the moving average, an upper band, and a lower band. ## What Do Bollinger Bands® Tell You? Bollinger Bands® are highly technical tools that give traders an idea of where the market is moving based on prices. It involves the use of three bands—one for the upper level, another for the lower level, and the third for the moving average. When prices move closer to the upper band, it indicates that the market may be overbought. Conversely, the market may be oversold when prices end up moving closer to the lower or bottom band. ## Are There Any Limitations to Bollinger Bands®? Yes. One of the main limitations is that it shouldn't be used as a standalone tool. In fact, Bollinger Bands® [should be used with other non-correlated indicators](https://www.investopedia.com/ask/answers/121014/how-do-i-create-trading-strategy-bollinger-bands-and-relative-strength-indicator-rsi.asp). Doing so may give you additional market signals that are much more direct. Another drawback is that they are calculated using a simple moving average. That's because older price data is weighted in the same way as recent data. ## The Bottom Line Bollinger Bands® are a popular technical analysis tool used to identify overbought or oversold conditions in securities. They consist of a centerline, a simple moving average, and upper and lower bands set by standard deviations. Traders often look for buy signals when prices dip below the lower band and potential sell signals when prices rise above the upper band, using the centerline as a reference for price trends. While Bollinger Bands® are valuable for spotting short-term price extremes, they have limitations and work best when combined with other non-correlated indicators for a fuller view of market conditions.
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