The Bollinger Bands® indicator is an oscillator meaning that it operates between or within a set range of numbers or parameters. As previously mentioned, the standard parameters for Bollinger Bands® are a 20 day period with standard deviations 2 steps away from price above and below the SMA line.
Essentially Bollinger Bands® are a way to measure and visualize volatility. As volatility increases, the wider the bands become. Likewise, as volatility decreases, the gap between bands narrows.
The bands must be thought of as a high and a low points, if the prices cross above the top band it means the asset is overbought and the opposite would indicate an oversold market.
Volatility is to be seen as a cycle, there are periods of expansion and contractions, which indicates high and low volatility markets respectively.
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