What are Bollinger Bands?
Bollinger Bands explained—middle SMA, upper/lower volatility bands, squeezes, and mean-reversion vs breakout context.
Bollinger Bands are a volatility envelope around price: a middle band (usually a 20-period SMA) plus upper and lower bands set at a standard number of deviations—typically two standard deviations—from that average. When volatility expands, bands widen; when it contracts, they squeeze.
Traders use Bollinger Bands to gauge relative price position, volatility cycles, and potential mean-reversion or breakout setups. For strategy walkthroughs, see Bollinger Band strategy.
Bollinger Bands glossary
| Term | Definition |
|---|---|
| Middle band | Usually a 20-period simple moving average—the "mean" price reference |
| Upper band | Middle band + (2 × standard deviation of price over the lookback) |
| Lower band | Middle band − (2 × standard deviation of price over the lookback) |
| Band width | Distance between upper and lower bands; proxy for volatility |
| Squeeze | Narrow bands after low volatility; often precedes a larger move (direction unknown) |
| Walking the band | Price riding upper or lower band in a strong trend—not always a reversal signal |
Default settings are 20, 2—20-period SMA with ±2 standard deviations. Adjust only with backtesting on your timeframe.
How to read Bollinger Bands
Touching the upper or lower band
A tag of the upper band means price is at the upper edge of recent statistical range—not automatically "overbought." In uptrends, price can walk the upper band for weeks.
A tag of the lower band means price is at the lower edge of recent range—again, context matters in downtrends.
The squeeze
When bands compress, volatility is low. Breakouts often follow—but direction requires structure, volume, and confirmation. Do not guess; wait for a break and retest when your plan calls for it.
Mean reversion vs. trend continuation
| Market type | Band behavior | Common read |
|---|---|---|
| Range | Price oscillates between bands | Fade extremes toward the middle band |
| Trend | Price hugs one band | Continuation until structure breaks |
Pair band reads with market regime and support and resistance.
Bollinger Bands and risk framing
- Define invalidation outside the band touch—wicks happen. See invalidation points
- Size for volatility—wide bands mean wider natural swings; see position sizing in trading
- Check confluence—band tag + RSI stretch + level beats band tag alone. See confluence in trading
ChartGuru includes Bollinger context in scored technical reads—analysis only, you decide execution.
FAQ
What do Bollinger Bands measure?
They measure where price sits relative to a moving average, adjusted for recent volatility via standard deviation.
Is touching the upper band a sell signal?
Not by itself. In strong uptrends, upper-band tags can persist. Context and confirmation matter.
What is a Bollinger Band squeeze?
A period of narrow bands indicating compressed volatility. Traders watch for breakout follow-through—not the squeeze alone.
What are the default Bollinger Band settings?
20-period SMA middle band with upper and lower bands at ±2 standard deviations.
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This article is for educational and informational purposes only. Nothing here constitutes personalized investment advice or a recommendation to buy or sell any financial instrument. All trading involves risk of loss.