Bollinger Bands are a technical analysis tool that depicts the volatility and overbought or oversold condition of a market.
Bollinger Bands, developed by John Bollinger in the 1980s, are a type of statistical chart used in technical analysis to characterize the volatility and overbought or oversold condition of a market. Bollinger Bands consist of a middle band, which is a simple moving average, and two outer bands which are standard deviations away from the middle band. The width of the bands fluctuates based on the standard deviation of the price, which changes as price volatility increases or decreases. In cryptocurrency trading, Bollinger Bands are often used as a tool to identify potential buy and sell signals. For instance, when the price of a cryptocurrency is above the upper band, it might be a signal that the cryptocurrency is overbought and could experience a price correction. Conversely, when the price is below the lower band, the cryptocurrency might be oversold and could be due for a price bounce. From an accounting perspective, while Bollinger Bands might not have direct relevance, understanding them could be useful for businesses or individuals that trade cryptocurrencies and need to track the cost and value of their trades.