Bollinger Band

A band plotted two standard deviations away from a simple moving average.

The standard deviation is a measure of volatility. When the markets become more volatile, the bands widen,  moving further away from the average. During less volatile periods, the bands contract, moving closer to the average.

The tightening of the bands is often used by technical traders as an early indication that the volatility is about to increase sharply.This is one of the most popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.