Bollinger Bands are a widely used technical analysis indicator developed by John Bollinger. They help traders measure market volatility, identify overbought or oversold conditions, and detect potential trend reversals or breakouts.
The indicator consists of three lines plotted on a price chart:
Middle Band – a Simple Moving Average (SMA), typically set to 20 periods;
Upper Band – the SMA plus two standard deviations;
Lower Band – the SMA minus two standard deviations.
These bands expand and contract based on market volatility:
When the market is volatile, the bands widen;
When the market is stable or consolidating, the bands narrow.
How traders use Bollinger Bands:
When price approaches or touches the upper band, the market may be overbought;
When price nears or dips below the lower band, the market may be oversold;
A squeeze (when bands narrow significantly) often precedes a strong breakout in either direction;
A price move outside the bands can signal continuation or exhaustion of a trend, depending on context.
Best used in combination with other indicators like Relative Strength Index (RSI), MACD, or volume analysis to avoid false signals and improve reliability.
Customization: Traders can adjust the period and standard deviation settings to fit different timeframes and strategies.
Bollinger Bands are available by default on all major FxPro platforms — including MetaTrader 4, MetaTrader 5, and cTrader — and can be customized directly within the charting tools.
