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Indicators · Volatility

Bollinger Bands

Bollinger Bands draw a moving average with bands at a number of standard deviations above and below it. The bands widen when volatility rises and contract when it falls, which makes them a volatility indicator first, and a measure of how extended price is relative to its recent range.

What it's for
  • Measure volatility: the bands widen when it rises and contract when it falls.
  • Spot squeezes, which often precede larger moves.
  • Judge how extended price is relative to its recent range.
Every planTry it in Analyze
Pane
On the price chart
Plan
Every plan
Settings
Length, standard deviations, source
Default
20, 2, close (John Bollinger's standard)

Calculation

basis = SMA(close, 20)
σ     = population standard deviation of the last 20 closes
upper = basis + 2σ,  lower = basis − 2σ

The population standard deviation (dividing by n) is the definition used by John Bollinger and by TradingView.

Statistically, about 95% of observations would fall within ±2σ for normally distributed data; prices are not normal (fat tails, trends), so closes outside the bands are more frequent than 5%, especially in trends.

The squeeze

Bollinger Bands contracting to their narrowest width, then a close above the upper band starts an advance
Volatility contracts: the bands reach their narrowest width of the period. A close outside the upper band then starts an expansion and an advance.

Periods of low volatility tend to be followed by periods of high volatility. A squeeze (unusually narrow bands) does not tell the direction of the next move, only that one is likely; the break of the range or of the bands gives the direction.

Walking the bands

Strong advance where price repeatedly reaches the upper Bollinger Band while rising
In a strong trend price repeatedly reaches the upper band and keeps rising: a touch of the band is a sign of strength here, not a sell signal.

Bollinger himself insisted that a touch of a band is not a signal in itself. In a range, extremes at the bands tend to revert to the middle; in a trend, price can walk the band for many bars. Use the context (and, for instance, the middle band as trailing support) rather than selling every upper-band touch.

Add it in Oyticker

  1. Click Indicators → Bollinger Bands.
  2. Click its legend to change the length, the number of standard deviations or the source.

Limits

  • The bands describe recent volatility; they do not predict direction.
  • A 20-bar window adapts quickly: after a volatility shock the bands stay wide for 20 bars, then suddenly narrow when the shock leaves the window.

Charts in this guide use simulated prices generated for illustration; levels and outcomes shown are examples, not observations of a real market. Educational content only, not investment advice.

Related guides

ATR (Average True Range)PlusHow Wilder's Average True Range is calculated from the true range, and how traders use it to set stops, size positions and detect volatility regimes.Regression channelPlusHow the linear regression channel is calculated (least squares of closes, ±k standard deviations, Pearson's r) and how to read it in trends and ranges.Moving averages (SMA, EMA, WMA, Hull)How simple, exponential, weighted and Hull moving averages are calculated, how to read slope, price position and crossovers like the golden cross, and why they fail in ranges.
Bollinger Bands: calculation, the squeeze and walking the bands | Oyticker