Bollinger Bands

Definition ∞ Bollinger Bands constitute a technical analysis tool measuring market volatility. These bands consist of a simple moving average positioned between an upper and a lower standard deviation band. They dynamically adjust to price fluctuations, contracting during periods of low volatility and expanding during high volatility. Traders frequently monitor price action relative to these bands to identify potential overbought or oversold conditions or to confirm trend strength.
Context ∞ In crypto news, discussions of Bollinger Bands often appear when analyzing digital asset price movements, particularly during periods of consolidation or significant price breakouts. Observing the narrowing of these bands may signal an impending volatility expansion. This is a critical event for understanding potential shifts in market sentiment or asset valuation. Their application helps interpret price action within the broader market structure.