Bollinger bands
What are Bollinger bands, and how do they show whether a price move is unusually far from its average?
In plain words
Bollinger bands are two lines drawn a set number of standard deviations (a measure of typical price spread) above and below a moving average. They widen when volatility rises and narrow when it falls, framing where the price usually sits.
Why it matters
A move that reaches or breaks a band is unusual relative to recent trading, which traders watch for reversals or breakouts. Because the bands expand with volatility, they adapt automatically: the same dollar move can be ordinary in a wild market and extreme in a calm one.
In a real week: BTC, week of 17 August 2026
In the week of 17 August 2026, BTC rose 23.58%, from 62900.0 to 77734.0, with an annualised realised volatility of 58.7%. Its high of 79500.0 on Friday 21 August exceeded the Monday low of 62751.1 by 26.69%, and the close sat at 89.5% of the week's range, in the upper third. Volatility at that level would widen any band system, so a move of this size would be judged against a much wider spread of recent prices than in a calmer week.
A common mistake
Treating a touch of a band as an automatic signal. Reaching a band marks an unusual move relative to the recent average, but strong trends can ride a band for many periods.