Bollinger Bands are a volatility indicator. They draw an envelope around price that widens when price moves become larger and narrows when the market becomes quiet.
How the bands are calculated
- Middle band: a simple moving average of the closing price, commonly over 20 periods.
- Upper and lower bands: the middle band plus and minus a multiple of the standard deviation of price over the same period, commonly two.
Because the bands are built from standard deviation, they react directly to how widely prices have been spread around their average.
What the bands describe
- Width: wide bands indicate high recent volatility; narrow bands indicate low volatility.
- Squeeze: a period of unusually narrow bands. It describes a quiet market; it does not say in which direction the next larger move will go.
- Position: where price sits relative to the bands shows how far it has moved from its recent average, measured in volatility terms.
Common misreadings
- “A touch of the upper band means a fall is coming.” In strong trends price can move along a band for an extended period.
- Ignoring the context. The same band touch means something different in a trending market and in a range.
- Using default settings everywhere. The common 20-period, two-standard-deviation setting is a convention, not a rule.
How our apps use it
Novira Crypto and NBORSA show the upper, middle and lower band values on the detail screen. Band levels are context for reading the chart; they are not used on their own to produce a setup.
This article is for educational purposes only and does not constitute investment advice.