Definition
Bollinger Bands
Bollinger Bands plot a moving average with upper and lower bands set at standard deviations to show volatility and extremes.
The middle band is typically a 20-period moving average, with the upper and lower bands placed two standard deviations away. The bands widen when volatility rises and contract during calm — a tight squeeze often precedes a sharp move. Price tagging the upper band suggests strength; the lower band, weakness.
NSE traders use Bollinger Bands on Nifty and stocks to gauge whether a move is overstretched and to anticipate breakouts after a squeeze. They are most powerful combined with volume and momentum tools, since price can ride a band in a strong trend rather than reverse.
Related terms
- VolatilityVolatility measures how much and how quickly a price moves up and down — higher volatility means bigger, faster swings.
- SupertrendSupertrend is a trend-following indicator that plots a line below price in uptrends and above price in downtrends, using ATR.
- BreakoutA breakout is when price moves decisively beyond a defined support, resistance, or pattern boundary, often starting a new move.
- Moving AverageA moving average smooths price data over a set period to reveal the underlying trend.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.