Meaning of the three lines of the Bollinger Bands

Bollinger Bands consist of three lines: the upper band, the middle band, and the lower band, each with its specific meaning and function. 1

Upper Band: Often regarded as a potential resistance level for prices. When the price touches or approaches the upper band, the market may be overbought, and the momentum of the price increase may weaken, with the risk of a pullback. This is usually a potential sell signal, but it should be noted that occasional breakthroughs of the upper band do not necessarily mean an inevitable pullback, as the market may be in a strong uptrend.

Midline (MID): As the benchmark line of Bollinger Bands, it can generally be regarded as the average level of prices. It reflects the trend direction of prices to some extent. When the midline is tilted upwards, it indicates that the market is in an upward trend; when the midline is tilted downwards, it indicates that the market is in a downward trend. The midline is usually an N-day moving average, and N is generally set to 20.

Lower Band: Typically seen as a possible support level for the price. When the price touches or approaches the lower band, the market may be oversold, and the downward momentum of the price may weaken, presenting an opportunity for a rebound. This is usually a potential buying signal, but the price breaking through the lower band does not absolutely mean a certain rebound; the market may be in an extremely weak state.

The calculation of the Bollinger Bands is based on the moving average and standard deviation. The middle line is the N-day moving average, the upper line is the middle line plus twice the standard deviation, and the lower line is the middle line minus twice the standard deviation. The width of the Bollinger Bands reflects the intensity of the stock price volatility. A wider width indicates more volatile recent market conditions, while a narrower width indicates relatively stable recent market conditions.

The application of the Bollinger Bands is very extensive, which can help investors judge the overbought and oversold conditions of the market, indicate trends and channels, and display the safe operating range of stock prices. By observing the operation of stock prices above the midline, the strong or weak state of stock prices can be confirmed. #荣誉积分新年抽奖，赢Macbook、周边好礼# #AI Meme逆势上涨，你持有哪些币种？# #2025新年比特币价格预测#