📊 Technical Indicators
What are Bollinger Bands?
Bollinger Bands are volatility bands placed above and below a moving average, used to measure market volatility and identify overbought/oversold conditions.
Bollinger Bands are a technical analysis tool developed by John Bollinger in the 1980s. They consist of three lines that create a channel around price action.
Components of Bollinger Bands
- . **Middle Band**: A 20-period simple moving average (SMA)
- . **Upper Band**: Middle band + (2 × standard deviation)
- . **Lower Band**: Middle band - (2 × standard deviation)
How to Read Bollinger Bands
- **Band Width**: Wider bands = higher volatility, narrower bands = lower volatility (squeeze)
- **Price at Upper Band**: Potentially overbought
- **Price at Lower Band**: Potentially oversold
- **The Squeeze**: When bands narrow significantly, a big move often follows
Bollinger Bands in Crypto
Due to crypto's high volatility, prices can "ride" the bands for extended periods in strong trends. The squeeze pattern is particularly useful for identifying potential breakouts.
💡 Key Points
- ✓Bands expand and contract based on volatility
- ✓Price touching outer bands suggests extreme moves
- ✓The "squeeze" often precedes significant price moves
- ✓Use with other indicators for confirmation
- ✓Standard settings are 20-period SMA with 2 standard deviations
How to Use Bollinger Bands
- 1Look for squeezes as potential breakout signals
- 2Buy near lower band with bullish confirmation
- 3Sell near upper band with bearish confirmation
- 4Use band width to gauge market volatility
- 5Combine with RSI for stronger signals