Bollinger Bands wrap price in a band that expands and contracts with volatility. They look clever — and they're useful — as long as you read them for what they are.
How they're built
Three lines:
- Middle band — a 20-period simple moving average.
- Upper and lower bands — placed two standard deviations above and below the middle.
Because standard deviation measures how spread out prices are, the bands widen when volatility rises and squeeze when it falls. That breathing motion is the whole point.
What the bands actually tell you
- The squeeze — when the bands pinch tight, volatility is low and a bigger move often follows. The squeeze hints something's coming, not which direction.
- Riding the band — in a strong trend, price can hug the upper (or lower) band for a long stretch. Touching a band is not a reversal signal.
- Mean reversion — in a range, price tends to drift from one band back toward the middle. This only works while the market is genuinely ranging.
The classic trap
Beginners sell every tag of the upper band and buy every tag of the lower one. In a trend that bleeds an account dry. A band touch describes where price is relative to recent volatility — nothing more.
Putting it to work
Bollinger Bands pair well with RSI (for momentum) and clear levels (for where to act). Use the squeeze to anticipate expansion, then let structure confirm direction and your risk/reward define the trade.
The bands measure volatility. They don't predict direction — confluence does.
Education only — not financial advice.