Bollinger Bands are a popular technical analysis indicator that consists of a middle simple moving average and two outer bands, typically set two standard deviations away from the moving average. These bands visually represent a security's typical price range, with prices often oscillating between the upper and lower bands; for example, if the price of AAPL stock touches the upper band, it might be considered overbought. Bollinger Bands are particularly useful for identifying periods of low and high volatility, which can precede significant price movements. When the bands contract, it signals decreasing volatility, often indicating a consolidation phase before a potential breakout. Conversely, when the bands expand, it suggests increasing volatility and a strong trend. For instance, if the price of Bitcoin (BTC) is consolidating with tight Bollinger Bands and then suddenly breaks above the upper band on high volume, traders might interpret this as a strong bullish signal, anticipating a significant upward trend. They could then look for entry points on retests of the breakout level, using the middle band as a potential dynamic support, with a stop-loss placed below the lower band to manage risk.