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What are Bollinger Bands?
Bollinger Bands plot a moving average with two bands above and below it, spaced by a multiple of the recent standard deviation. Because the bands widen and narrow with volatility, they show both trend and how much the price is moving around.
Middle band = N-period SMA
Upper band = Middle + (multiplier × standard deviation)
Lower band = Middle − (multiplier × standard deviation)
Upper band = Middle + (multiplier × standard deviation)
Lower band = Middle − (multiplier × standard deviation)
How to read it
- Price near the upper band is relatively high against its recent range. Price near the lower band is relatively low. Neither is automatically a signal to trade.
- Bands that squeeze together mean low volatility, which sometimes comes before a bigger move. Bands that spread apart mean volatility has picked up.
- %B in the calculations table shows exactly where the price sits: 0% is the lower band, 100% is the upper band.
Common questions
Why 20 periods and a multiplier of 2?
These are the values John Bollinger originally suggested, and most platforms still default to them. You can change both in Settings.
Does price touching a band mean it will reverse?
No. In a strong trend price can ride along a band for a long time. The bands describe recent volatility, not a fixed prediction.
What does bandwidth mean?
It is the gap between the upper and lower band, shown as a percentage of the middle band. A falling bandwidth means the bands are squeezing.