Bollinger Bands

The bands widen when volatility rises and narrow when it falls, which is their genuine content — they are a volatility measure drawn around price. The frequent claim that roughly 95% of prices fall within two standard deviations assumes a normal distribution, and financial returns have fatter tails than normal, so extremes occur more often than that arithmetic implies. Touching a band is not a signal: in a strong move price can ride the upper band for weeks, a behaviour known as walking the band. The construction is described here without any suggestion that a touch indicates a reversal.