Bollinger Bands
Also called: Bollinger squeeze, Bandwidth, Bollinger band, Bollinger bantları, Bollinger sıkışması
Bands drawn 2 standard deviations either side of a 20-period average; they show how volatile price is, not which way it is heading.
4 min read · one puzzle on the page
What do Bollinger Bands show?
Bollinger Bands are three lines. The middle one is a simple average of the last 20 closes. The upper band sits 2 standard deviations above that average, the lower band 2 standard deviations below. John Bollinger, who developed the indicator, proposed these settings, and they are the default on most platforms.
Standard deviation measures how spread out the closes are around the average. When price is calm, closes stay near the average and the bands narrow. When price moves hard, closes drift away and the bands widen. The width of the bands is volatility itself.
The bands don't give direction. A touch of the upper band doesn't mean price is expensive, and a touch of the lower band doesn't mean it is cheap; it only says price is unusually far from the last 20 candles' average. In a strong trend price can walk along one band for days.
How to read Bollinger Bands on a chart
Say on EUR/USD the middle band is 1.0850, the upper 1.0890 and the lower 1.0810. That is 80 pips between the bands, a standard deviation of about 20 pips. Price has room to move.
Then the market goes quiet ahead of a major data release. Within a few hours the bands contract to 1.0858 and 1.0838, a 20-pip gap. That is a squeeze. Volatility is at its lowest in weeks, and that rarely lasts: calm stretches are often followed by sharp moves.
Keep two things apart here. A squeeze tells you a big move is coming, not which way. Narrowing bands favour neither buyers nor sellers. Price shows the direction afterwards, when a candle closes with its body outside the squeeze and the candles after it hold on that side.
If you trade a squeeze, the stop goes beyond the opposite edge. Buying on a close above, the stop sits below 1.0838; entry 1.0860, stop 1.0835, 25 pips of risk, which is 1R. But in the minutes around news, price can cross both edges within seconds and the stop fills where price can be found, not where you wrote it. That is why many traders wait for the release and the first candle closes.
Try it on a chart
Bollinger Bands are not drawn on this chart. What they measure, how tightly recent candles are squeezed together, is visible directly in the candle sizes and the marked edges. Look at where price sits relative to those edges and where you could place a stop.
The data release is minutes away. Your turn: read the chart and make your call.
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common Bollinger Bands mistake
Treating the upper band as an automatic sell and the lower band as an automatic buy. In a range that sometimes works, because price turns at the edges. Once a trend starts, price walks the upper band and someone selling each touch gets stopped out again and again.
Guessing direction in a squeeze. Taking a position early because the bands narrowed and it will surely break up is a coin toss. And the first move out of a squeeze is often false: price jumps one way, takes the stops there and makes the real move the other way.
Reading a close outside the band as an extreme. A candle closing outside the band sometimes shows the strength of a new move rather than exhaustion. If the next candles stay on that side, the move isn't over and there is no case for fading it.
When do Bollinger Bands fail?
At the moment of the news itself. When data drops, a single candle blows the bands open. The bands follow price and give no directional information during that candle.
As a counter-trend tool in strong trends. The bands stay wide in a trend and price rides the edge. A band touch there is a picture of the trend continuing, not a reversal.
In very quiet markets a squeeze may mean nothing. On holidays or in the dead hours between sessions the bands narrow, but no big move has to follow. That narrowing comes from thin participation, not from pressure building.
Finally, the bands are not levels. They move with every new candle. Tying a stop or target to a band ties it to a line that slides every candle. Stops still belong at the highs and lows where price actually turned.
Frequently asked questions
What is a Bollinger squeeze?
A squeeze is when the bands contract to their narrowest in recent memory. It shows price has been held in a tight area and volatility has dropped. Because calm periods are often followed by sharp moves, a squeeze is read as a sign that something is building. It gives no direction; that is decided by which side of the squeeze price closes on and holds.
Should you sell when price touches the upper band?
Not on its own. The upper band says price is unusually high relative to the last 20 candles, not that it will fall. In a range the upper band may line up with the top of the range; in a trend price can keep climbing along it. What would make you consider selling is a rejection at resistance followed by the structure breaking, not the band.
Why are the Bollinger settings 20 and 2?
They are the defaults John Bollinger suggested, and most platforms use them. Twenty periods captures short to medium-term movement, and 2 standard deviations is wide enough that price stays inside the bands most of the time. You can change them, but new settings only make the bands narrower or wider; they add no directional information.
