Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. It allows users to compare volatility and relative price levels over a period of time. Bollinger Bands consist of three bands designed to encompass the majority of a security's price action. Prices will often meet resistance at the upper band and support at the lower band.

Bollinger Bands consist of:

Typical values for N and K are 20 and 2, respectively. The simple moving average is of the trailing type, not the centered type; in the trailing type, the average is plotted at the time-coordinate of the n-th price, not at the median time-coordinate of the set of N prices.

Contracting bands warn that the market is about to trend: the bands first converge into a narrow neck, followed by a sharp price movement. The first breakout is often a false move, preceding a strong trend in the opposite direction.

A move that starts at one band normally carries through to the other, in a ranging market.

A move outside the band indicates that the trend is strong and likely to continue - unless price quickly reverses.

Bollinger Bands should be used as a measure together with other measures, most notably the Average Directional Index (ADX), RSI and Stochastic indicators.