> ## Documentation Index
> Fetch the complete documentation index at: https://learn.algopilot.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Bollinger Bands

**What is it?**\
Bollinger Bands are like a rubber band around an asset’s price, showing where it’s likely to bounce or break out. They consist of a middle line (a moving average) and two outer bands that measure volatility.

**How is it used?**

* **Overbought/oversold**: Prices touching or exceeding the upper band may be overbought; touching the lower band may be oversold.
* **Volatility squeeze**: When bands contract (low volatility), a breakout is likely. Wide bands indicate high volatility.
* **Mean reversion**: Prices often return to the SMA after touching the bands.

**How is it calculated?**

* **Middle band**: A Simple Moving Average (SMA), typically over 20 periods.
* **Upper band**: SMA + (k × standard deviation of price over the same period).
* **Lower band**: SMA - (k × standard deviation).\
  The standard settings are a 20-period SMA and k = 2 (2 standard deviations).

Upper Band = SMA + (2 × StdDev)  

Lower Band = SMA - (2 × StdDev)

<sub>The above content is designed for informational purposes only, and is explicitly not investment advice. Algo Pilot is a US based technology company and not a bank, broker-dealer, or RIA. As such, Algo Pilot LLC does not provide investment advice and is not a member, SIPC. Brokerage services offered by 3rd parties are not directly affiliated with Algo Pilot LLC, and Algo Pilot users may choose the broker relationship that they desire.</sub>