What the Indicator Shows
Bollinger Bands consist of a central moving average and several lines offset from it by one, two, or more multiples of the standard deviation (σ, sigma). They are based on the statistical idea that, under a normal distribution, the price would fall within ±1σ about 68% of the time and within ±2σ about 95% of the time.
How to Read It, and What to Watch Out For
A narrowing band width indicates smaller price movement, while a widening one indicates larger price movement. Some view the price moving outside the bands as a sign that a bounce is likely, but during strong trends the price can continue moving along the band for an extended period, so the bands cannot be treated as an absolute trading signal.