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Bollinger Bands: volatility bands, the squeeze and how to trade them

A 20-period average with two standard-deviation bands: measure volatility, catch squeezes and ride the bands in a trend.

What Bollinger Bands are

John Bollinger created the bands in the 1980s. They are a 20-period SMA in the middle with two bands set 2 standard deviations away. When the market gets volatile the bands widen; when it goes quiet they contract.

On TradingViewBollinger Bands
Length20
StdDev multiplier2
Companion toolsBollinger Bands %B, Bollinger BandWidth

Three main readings

  • Squeeze: the bands are the narrowest in months → low volatility often comes before a strong breakout. The direction is unknown in advance, so wait for a close outside the bands.
  • Walking the bands: in a strong uptrend price can hug the upper band again and again. Touching the upper band is not a sell signal by itself.
  • Mean reversion: in a range, price that tags an outer band and closes back inside tends to drift back to the 20 SMA.

How to trade them

  1. Squeeze breakout: set an alert when BandWidth is low; enter in the direction of a close outside the bands with rising volume; stop at the 20 SMA or the other side of the squeeze.
  2. Trend: buy pullbacks to the 20 SMA in an uptrend once price bounces; stop below the lower band.
  3. Range: sell the upper band and buy the lower band only with a clear rejection candle and a low ADX.
TipJohn Bollinger recommends confirming with a different kind of indicator, such as RSI or a volume indicator.
Watch outSqueezes often start with a fake move the wrong way before the real one. Always use a stop.

Try it on a chart

Educational content only, not investment advice. Practise on a demo account before using real money.