The Bollinger Bands indicator is a technical tool that helps you identify overbought or oversold conditions for a currency or stock, and know when a price explosion may occur.

🧠 Indicator components:

1. Middle Band:

Simple Moving Average (SMA) for a period of 20 typically.

2. Upper Band:

= SMA + (2 × Standard Deviation).

3. Lower Band:

= SMA - (2 × Standard Deviation).

🎯 How to use it in trading:

1. Buy from the lower band

If the price touches the lower band, it often indicates an oversold condition → Buying opportunity.

2. Sell from the upper band

If the price touches the upper band, it often indicates an overbought condition → Selling or profit-taking opportunity.

3. Price explosion (Bollinger Squeeze)

When the bands come close together and the range narrows → Quiet market.

After that, a strong price explosion often occurs either upward or downward.

4. Confirmation with other indicators

It is preferable to use it with RSI or MACD to confirm signals.

📌 Practical example:

On a 4-hour chart:

The price touched the lower band.

RSI below 30. → Buy entry, with the target being a return to the middle band or the upper band.