Bollinger Bands
Bollinger Bands, developed by John Bollinger in the 1980s, consist of a 20-period SMA (middle band) with upper and lower bands set 2 standard deviations away. The bands automatically widen during volatile periods and narrow during quiet periods.
Bollinger Bands
Middle Band = 20-period SMA
Upper Band = SMA + (2 × 20-period Standard Deviation)
Lower Band = SMA − (2 × 20-period Standard Deviation)- Squeeze — When bands contract tightly, a major move (breakout) is often imminent.
- Touches — Price touching the upper band doesn't automatically mean "sell" (strong trends ride the upper band).
- Mean Reversion — Price tends to return to the middle band (20 SMA) in ranging markets.
- %B — Shows where price is relative to the bands (above 1.0 = above upper band).
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