Bollinger Bands Explained
Bollinger Bands wrap a moving average in two volatility bands. They widen when volatility rises and pinch tight before big moves — a visual read on volatility.
How the bands work
The middle line is usually a 20-period moving average; the upper and lower bands sit two standard deviations above and below it. Because standard deviation is a volatility measure, the bands widen in volatile conditions and narrow in quiet ones.
Roughly 90% of price action stays within the bands, so a touch of the outer band means price is statistically stretched — but stretched is not the same as reversing. In a strong trend, price can 'ride the band' for a long time.
The squeeze and band touches
The most useful signal is the squeeze: when the bands pinch to their tightest in months, volatility is coiling and a large expansion move often follows. The squeeze tells you a move is coming, not which direction — pair it with structure for the bias.
In a range, band touches can be faded back to the middle (mean reversion). In a trend, fading them is dangerous. Read the regime first, then decide whether a band touch is a reversal or continuation.
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Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What do Bollinger Bands show?
They show volatility. The bands are set two standard deviations from a moving average, so they widen when volatility rises and narrow when it falls.
What is a Bollinger Band squeeze?
When the bands pinch to an unusually narrow width, signalling low volatility that often precedes a large expansion move. It signals a move is coming but not its direction.
Does price touching the band mean reverse?
Not necessarily. In a range a band touch can mean-revert, but in a strong trend price can ride the band for a long time. Context decides.