Bollinger bands investment & finance definition

A technical analysis system that plots two standard deviations above and below a moving average and on the moving average itself. Standard deviation measures volatility, so these bands will be wider during increased volatility and narrower during decreased volatility. Tech-nical analysts believe that a market that approaches the upper band is overbought, while a market that approaches the lower band is oversold. Overbought means that too many buyers have entered the market and prices are likely to fall. Oversold means that too many sellers have sold, and the next price direction will likely be upward.