Bollinguer Bands were created by John Bollinger in the 1980s and are built on the basis of three moving averages: the central moving average, the upper moving average or upper band, and the lower moving average or lower band.
They are a kind of "river" that goes along with the price of an asset and shows its volatility.
Volatility represents the variability of the price of an asset.
When there is little volatility in the price, the Bollinguer bands become narrower, while when there is a lot of volatility, the bands expand.
Few times the price moves outside the bands, therefore the signals are seen when the prices approach any of their extremes.
If the price exceeds the upper band, it indicates a strengthened price, and when it is below the lower band, it indicates a weakened price.
This indicator should be used in conjunction with others, and is most useful when exiting a position.
It is ideal for discovering price extremes, in addition to measuring market volatility.