Bollinger Bands Explained: Settings & How to Read

Bollinger Bands are three lines around price: a moving average in the middle, and an upper and lower band set a number of standard deviations away. They widen when the market is volatile and narrow when it’s quiet. They were developed by John Bollinger in the 1980s.

Neutral explainer. This page explains how the indicator is calculated and read. Indicators are derived from past prices and don’t predict the future on their own.

How Bollinger Bands are calculated

Middle band = 20-period simple moving average
Upper band  = Middle band + 2 × standard deviation (20 periods)
Lower band  = Middle band − 2 × standard deviation (20 periods)

Standard deviation measures how spread out recent closes are around their average. When prices swing widely, it rises and the bands move apart.

How traders read them

Volatility: wide bands mean high volatility; narrow bands mean low volatility.
The squeeze: when the bands become unusually narrow, it often comes before a period of bigger moves, though it doesn’t tell you the direction.
Touches aren’t signals by themselves: in a strong trend, price can “walk the band”, repeatedly touching the upper (or lower) band.
Mean reversion: in sideways markets, some traders watch for moves back towards the middle band.

%B and bandwidth

%B = (Price − Lower band) ÷ (Upper band − Lower band). 1 means price is at the upper band, 0 at the lower band.
Bandwidth = (Upper − Lower) ÷ Middle. It measures how wide the bands are, which helps spot squeezes.

On TradingView

Click Indicators and search for Bollinger Bands. They’re drawn on the price chart with a default length of 20 and multiplier of 2. TradingView also has separate Bollinger Bands %B and Bollinger BandWidth indicators. The middle band is a simple moving average.

Educational explanation only. ChartWatch is independent and doesn’t give trading or investment advice. Trading carries a risk of loss.

FAQ

What are Bollinger Bands?

A volatility indicator with a 20-period moving average in the middle and bands 2 standard deviations above and below it.

What is a Bollinger Band squeeze?

When the bands narrow sharply because volatility is low. It often precedes a larger move, but doesn't indicate which direction.

Is touching the upper band a sell signal?

Not on its own. In strong uptrends price can ride along the upper band for a long time.

What are the default Bollinger Band settings?

A 20-period simple moving average with bands at 2 standard deviations.

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