Bollinger Bands Explained
Learn how Bollinger Bands use a moving average and standard deviation to frame volatility, trend pressure, and range expansion.
Common Formula
Middle band = moving average; upper/lower bands = moving average +/- standard deviations
What Bollinger Bands show
Bollinger Bands place an upper and lower volatility band around a moving average. The bands widen when volatility increases and narrow when volatility decreases, making them useful for seeing when a market is quiet or active.
How traders read them
Price near the upper band can show strength, while price near the lower band can show weakness. A close outside a band is not automatically a reversal signal; in strong trends, price can ride a band for several periods.
Why squeezes get attention
A squeeze happens when the bands become unusually tight. It can signal that volatility has compressed, which often leads traders to watch for a later breakout or breakdown.
Best Used For
- Scanning volatility expansion and contraction
- Comparing price against a moving average envelope
- Researching breakouts from tight ranges
Common Mistakes
- Assuming every band touch means price must reverse
- Ignoring whether volatility is expanding or contracting
- Using bands without support, resistance, or volume context
Practice on real charts
Use indicators as a research layer on top of price, volume, source timestamps, and market context. ProStockCharts pages are for research and education, not investment advice.