Bollinger Bands are plotted at 2 standard deviations above and below a 20-day exponential moving average. As standard deviation is a measure of volatility, the bands are self-adjusting: widening during volatile markets and contracting during calmer periods. The price are considered "overbought" when they touch the upper band and "oversold" when they touch the lower band. Statisticly 95% of price data should fall between the two tranding bands. A way to use Bollinger Bands is to use the upper and lower bands as price targets. If prices bounce off the lower band and cross above the 20 day average, then the upper band becomes the upper price target. Bollinger Bands was created by John Bollinger.
