when prices move outside the upper or lower bands this suggests that the security is trading at a statistically high or low level relative to its recent price history this indicates potentially overbought or oversold conditions respectively however prices can remain outside the bands for extended periods during strong trends 1
by examining the relationship between the price and the upper band you can look for overbought conditions check for potential price reversals or a slowdown in momentum find out when volatility is expanding set price targets based on mean reversion strategies and determine the strength of a trend 4