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A technical analysis tool consisting of a middle moving average band with upper and lower bands set at a specified number of standard deviations away.
Developed by John Bollinger, the bands typically use a 20-period simple moving average with bands set 2 standard deviations above and below. When the bands narrow (a "squeeze"), it often signals an impending period of high volatility. Prices touching the upper band may indicate overbought conditions, while touching the lower band may signal oversold conditions. About 95% of price action falls within the bands. Traders use Bollinger Bands alongside other indicators like RSI for confirmation.