What does Bollinger Bands mean?

Bollinger Bands wrap a stock's price between an upper and lower band; the bands widen when volatility rises and pinch tight when it drops.

Bollinger Bands wrap price between an upper and lower band set 2 standard deviations from a 20-day SMA. Bands widen when volatility rises and pinch tight when it drops — a 'squeeze' often precedes a big move.

Bollinger Bands example

With a 20-day average of $50 and a standard deviation of $2, the upper band sits at $54 and the lower band at $46. When the bands squeeze tightly together, a bigger move often follows — in either direction.

Common beginner mistake

Assuming touching the upper band means the price must fall. In strong trends prices can "walk the band" for weeks.