Signals

Bollinger Bands

Frame price with a moving average and volatility bands.

What it is

Bollinger Bands wrap price with an SMA-based middle band and an upper/lower envelope set by a configurable number of standard deviations.

When to use it

Visualizing expansion and contraction in volatility.
Spotting potential mean-reversion setups when price stretches to an outer band.
Combining with momentum indicators to avoid fading strong breakouts too early.

The maths

Middle = SMA(N), Upper = SMA(N) + (k × σ), Lower = SMA(N) - (k × σ) Here σ is the rolling standard deviation of close prices and k = 2 by default.

What it tells you

Price touching the upper band can signal overbought conditions; the lower band can signal oversold conditions. A band squeeze often precedes volatility expansion, while price walking along a band confirms a strong trend.

REST example

python

import os
import requests

response = requests.get(
  'https://api.financedata.com/v1/signals/BollingerBands/AAPL',
  params={
      'start_date': '2025-01-01',
      'end_date': '2025-04-30',
      'period': 20,
      'std_dev': 2.0,
  },
  headers={'X-API-Key': os.environ['FDA_KEY']},
  timeout=30,
)
response.raise_for_status()
print(response.json())

MCP example

Tool call body

{
"name": "get_bollinger_bands",
"arguments": {
  "symbol": "AAPL",
  "start_date": "2025-01-01",
  "end_date": "2025-04-30",
  "period": 20,
  "std_dev": 2.0
}
}

Agent prompt that triggers it

Pull Bollinger Bands for AAPL and tell me whether the latest close is near the upper, middle, or lower band.