Bollinger Bands are a volatility-based technical indicator consisting of three lines: a simple moving average (SMA) and two standard deviation bands above and below it.
They help traders measure volatility and identify overbought or oversold conditions.
When the price touches the upper band, the market may be overbought. When it touches the lower band, it may be oversold. Traders look for breakouts or bounces to make informed decisions.
Test your knowledge of Bollinger Bands and their role in forex trading with the following questions:
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