John Bollinger, a financial analyst and trader, developed Bollinger Bands in the 1980s, which is a technical analysis indicator widely used in the crypto market.
Bollinger Bands helps traders assess price volatility, identify reversal points, and make informed trading decisions in cryptos.
The tool consists of three lines: a middle, an upper, and a lower band. The middle band is a Simple Moving Average (SMA) representing the asset’s price over a specified period. The lower and upper bands are typically two standard deviations above or below the SMA. These bands expand and contract based on the underlying asset’s volatility.
Key indicators from Bollinger Bands:
- Upper Band: Prices nearing the upper band may signal an overbought market.
- Lower Band: Prices nearing the lower band may indicate an oversold market.
Bollinger Bands are constructed using a simple moving average and standard deviation, the two fundamental components that provide valuable insights into price volatility and potential trading opportunities in the crypto markets.
