All TermsIndicator

Bollinger Bands

Bollinger Bands consist of a middle SMA (typically 20 periods) and two outer bands placed at 2 standard deviations above and below. The bands widen in volatile markets and contract in quiet ones.

Reading the bands

Roughly 95% of price action falls inside the bands under a normal distribution. A close outside the bands is a statistical extreme — either a strong trend continuation or a reversal candidate, depending on context.

Squeeze

When the bands narrow inside the Keltner Channel, volatility is unusually low — a "squeeze". Squeezes precede explosive moves. See Squeeze Breakout.

In Pine Script

pinescript

basis = ta.sma(close, 20)
dev = ta.stdev(close, 20) * 2
upper = basis + dev
lower = basis - dev

See Bollinger Band Reversion for the canonical mean-reversion implementation.

Strategies that use Bollinger Bands

Bollinger Band Reversion

Buy lower band, exit upper band — volatility-adaptive mean reversion.

Squeeze Breakout

Trade the breakout of a Bollinger Band squeeze — entries only when volatility expands.

Related Terms

ATR (Average True Range)

ATR measures volatility by averaging the true range — the largest of today's high-low, |high-close[1]|, or |low-close[1]| — over N bars.

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