Technical Indicators

Bollinger Bands

An envelope drawn above and below a moving average by the amount of volatility, showing whether price is higher or lower than usual.

In plain terms

With a moving average in the middle, it draws a band above and below by "how much the price swings lately (volatility)." When price swings more than usual the band widens; when calm it narrows.

Price touching the upper band means it is higher than usual; touching the lower band, lower than usual. (Here "standard deviation" measures how scattered values are around the average.)

What it tells you

It looks at how far price has strayed up or down from its recent average, and whether volatility is rising or falling.

When the band has narrowed (calm) for a while and then suddenly widens, it is sometimes read as a signal that a big move has begun.

Formula

middle line = 20-day moving average (SMA)
upper band = 20-day average + (standard deviation × 2)
lower band = 20-day average − (standard deviation × 2)

What high or low means

Price touching the upper band is read as short-term higher than usual (overheated); touching the lower band, lower than usual (depressed).

But in a strong trend price can ride one band and keep going, so touching a band does not mean the direction changes right away.

Caution

Touching a band is not itself a buy/sell signal. In a strong trend, price can hug the upper (or lower) band and keep going for a while.

Like RSI and MACD, it looks only at price and volatility, not company value. "Lower than usual" does not mean "cheap."

Being a reference tool for short-term flow, it is best kept separate from long-term investment judgment.

Metrics to read alongside

RSI (Relative Strength Index)

If Bollinger Bands look at "how far price strayed from its usual range," RSI looks at "how overbought or oversold it is" as a number. Together they let you check short-term skew two ways.

Moving Average (SMA)

The middle line of Bollinger Bands is exactly a moving average. They are a base trend line (moving average) with a volatility envelope added, so together they let you read the trend and the range.

MACD (Moving Average Convergence Divergence)

Reading Bollinger Bands (volatility, usual range) with MACD (trend strength) lets you gauge whether volatility is expanding now and which way the trend is strong.

See it in real stocks

Search US stocks on Stocklore to see Bollinger and other financial metrics alongside the sector average.

AAPL Apple Inc.MSFT Microsoft Corporation NVDA NVIDIA Corporation AMZN Amazon.com, Inc.Search stocks →

Exactly how Stocklore computes this metric (formula, thresholds, SEC source) is on the methodology page.

This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.