Bollinger Bands

A technical analysis tool, Bollinger bands are lines plotted one standard deviation above and below the moving average of closing prices. As standard deviation measures price volatility so the bands narrow and widen, narrow in calm markets and wide in volatile markets. A narrowing of the bands often indicates the start of a new trend, which is confirmed when prices close out of the band. Bollinger bands may be used with any price chart but are most commonly used with bar charts.

See also: www.bollingerbands.com