Bollinger Bands

Bollinger Bands are a volatility indicator consisting of three lines: a 20-period simple moving average (middle band) and two bands plotted two standard deviations above and below it. Created by John Bollinger, they dynamically expand and contract based on market volatility.

How Bollinger Bands Are Used in Trading

The "squeeze" is one of the most popular Bollinger Band strategies. When bands narrow significantly, it indicates low volatility and often precedes a strong breakout move. Traders watch for the squeeze and then enter in the direction of the breakout once price moves outside the bands.

Bollinger Band width, the distance between the upper and lower bands, is itself a useful metric. Comparing current width to historical averages helps identify when volatility is unusually high or low. Mean reversion traders look for price touching the outer bands as potential reversal zones.

Combining Bollinger Bands with RSI helps distinguish between genuine breakouts and false ones. A price touching the upper band while RSI shows overbought conditions is a different signal than the same touch with neutral RSI.

Access via API

Get all Bollinger Band components in one call:

Returns upper band, middle band, lower band, and bandwidth values.