Devised by John Bollinger, a Bollinger Band is a technical analysis tool designed to aid traders to get a higher probability of determining the direction of an asset, being oversold or overbought. A Bollinger band consists of three lines including the Simple Moving Average (SMA) that technically serves as the middle band, the upper band, and the lower band.
The upper and lower bands are two standard deviations (positive and negative) from a 20-day SMA. However, this can be modified. In essence, when the price moves closer to the upper band, the market is considered overbought. Likewise, prices moving closer to the lower band indicate an oversold market.