Bollinger Bands
BB
Bollinger Bands consist of a middle band (20 SMA) with upper and lower bands set at 2 standard deviations above and below. The bands widen during volatile periods and contract during quiet periods, providing a relative definition of high and low prices.
Interactive Chart
117.58Parameters
Number of periods for the middle band SMA.
Number of standard deviations for band width.
Quick Answer
Price envelope showing volatility around a moving average.  Created by John Bollinger in the 1980s, Bollinger Bands are a volatility indicator. About 95% of price action typically occurs within the bands.
Trading Signals
Squeeze
NeutralBands contract significantly, signaling upcoming volatility
Upper Band Touch
NeutralPrice touches or exceeds upper band
Lower Band Touch
NeutralPrice touches or exceeds lower band
Mean Reversion
NeutralPrice returns to middle band from extremes
What are Bollinger Bands?
Created by John Bollinger in the 1980s, Bollinger Bands are a volatility indicator. About 95% of price action typically occurs within the bands. The bands adapt to market conditions, widening during high volatility and contracting during low volatility.
How to Read Bollinger Bands
Warning
Instead, look for: 1) Squeeze patterns (contracting bands) signaling upcoming volatility, 2) Band walks where price hugs a band during trends, 3) W-bottoms and M-tops for reversals.
Trading Signals
Key signals include:
Note
Trading Strategies
In ranging markets, buy at lower band and sell at upper band. In trending markets, look for pullbacks to the middle band as entry points.
Pro Tip
Formula
Middle Band = 20 SMAUpper Band = Middle + (2 × 20-period StdDev)Lower Band = Middle - (2 × 20-period StdDev)
Tips & Common Mistakes
Pro Tips
- •Squeeze setups often precede significant moves
- •Use %B indicator for precise band position
- •Combine with volume for breakout confirmation
- •Don't use bands alone - they show volatility, not direction
Common Mistakes
- •Treating band touches as automatic buy/sell signals
- •Ignoring that bands expand and contract with volatility
- •Not considering the overall trend
- •Using same settings for all timeframes