Bollinger Bands Complete Guide
Bollinger Bands
What is Bollinger Bands?
Bollinger Bands, developed by John Bollinger in the 1980s, consist of a middle band (20-period SMA) and two outer bands set at 2 standard deviations above and below. The bands expand during high volatility and contract during low volatility. When price touches or exceeds the upper band, the security may be overbought; when it touches the lower band, it may be oversold. The 'Bollinger Squeeze' — when bands narrow significantly — often precedes a sharp price move. Approximately 95% of price action occurs within the bands under normal conditions.
Signal Types
Above Upper Band
Price closes above the upper band — strong momentum or potential overbought
Below Lower Band
Price closes below the lower band — strong selling or potential oversold
Bollinger Squeeze
Bands narrow significantly — low volatility, often precedes a breakout
Related Indicators
FAQ
What do Bollinger Bands tell you?
They show volatility and relative price levels. Narrow bands suggest low volatility (potential breakout ahead), wide bands suggest high volatility.
What is a Bollinger Band squeeze?
A squeeze occurs when the bands contract to their narrowest width. It signals that a period of low volatility is likely to be followed by a significant price move.
Should I buy when price touches the lower band?
Not automatically. A touch of the lower band in a downtrend may signal continued weakness. Use additional confirmation (RSI, volume, candlestick patterns) before acting.
Parts of this page (FAQ, introductions) are AI-assisted. Core data and statistics are algorithmically computed. All pattern definitions are human-reviewed.
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Data source: EODHD · © 2026 KlineVision AI