Bollinger band is a technical analysis tool that is used in trading cryptocurrencies, assets, or indexes. This technical tool is named after its creator, an extraordinary technical trader John Bollinger. The Bollinger bands mainly consist of three lines i.e. a simple moving average, an upper band, and a lower band.
The tool is mostly used as a visual indicator to recognize the volatility of the presented asset. Traders use Bollinger bands in cryptocurrencies mainly for two trading strategies, namely mean reversion and breakout trades.
Bollinger bands are more relevant in cryptocurrencies while identifying breakout trades due to their high volatility. On the contrary, a mean reversion strategy may not be applicable for such high volatile market. It can be more advantageous in lesser volatile markets such as stocks.