Bollinger Bands Explained in 60 Seconds, Technical Analysis, Indicator, Chart, Buy Sell Signal
There are 3 lines that make up the Bolling Bands. The middle line is usually the 20-day simple moving average, the 20SMA. Below the middle line, there is the lower Bollinger Band, which is the 20SMA minus 2 standard deviations of the last 20 daily closing prices. Above the middle line, there is the upper Bollinger Band, which is the 20SMA plus 2 standard deviations. Bollinger Bands can also be drawn based on the weekly data, hourly data, etc.
The probability of the closing price of a stock falling outside of the upper and lower Bollinger Bands is usually only 5% to 10%. Many traders will get ready to sell a stock when the price is above the upper Bollinger Band. Conversely, when the price is below the lower Bollinger Band, there is a high probability that it will rebound soon. Of course, stock prices are also affected by fundamental issues such as company performances and macroeconomic events.
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