Bollinger Bands: what they are and how to read them
By Bec, futures trader and founder of Wildflower · Updated
Bollinger Bands are three lines around price: a A moving average where every close in the window counts the same: add them up and divide by how many there are.More in the glossary in the middle, and a band above and below it set a number of A measure of how spread out a set of numbers is. The more the closes differ from their average, the bigger it is.More in the glossary away. The bands widen when price moves a lot and narrow when it’s quiet. Many charts open with 20 candles and 2 standard deviations, but you choose.
What Bollinger Bands are, and what they show
Bollinger Bands wrap price in a channel that changes width. The middle line is an average of recent closes. The bands above and below it are set by how spread out those closes have been.
When price jumps around a lot, the closes are spread out, so the bands move apart. When price is quiet, the bands squeeze in close. So the width of the bands is a picture of How much and how quickly price moves. A market that swings a lot is called volatile.More in the glossary: how much price has been moving.
Because the bands are built from closes, a wick can poke outside them even on a quiet candle. They’re named after John Bollinger, the analyst who created them in the early 1980s.
How Bollinger Bands are worked out, step by step
1. Draw the middle line
A simple moving average of the closes. 20 candles here.
2. Measure the spread
Work out the standard deviation of the same 20 closes, and multiply it by 2.
3. Add and subtract it
Middle + 2 SD is the upper band. Middle − 2 SD is the lower band.
4. Repeat on every candle
Join the dots on every candle. The bands spread apart when the closes spread out.
What a standard deviation is. It’s a measure of how far a set of numbers sits from its average. Take five closes: 100, 102, 101, 104 and 103. Their average is 102.
- How far each is from 102: −2, 0, −1, +2, +1.
- Square them (so minus signs don’t cancel out): 4, 0, 1, 4, 1. They add up to 10.
- Divide by 5, then take the square root: 10 ÷ 5 = 2, and the square root of 2 is 1.41 (rounded). That’s the standard deviation.
- The bands, at 2 standard deviations: 102 + 2.83 = 104.83 and 102 − 2.83 = 99.17.
Bollinger Bands divide by the number of closes (here 5), not one less, as some statistics do. 20 candles and 2 standard deviations are the values John Bollinger described, and most charts start there. They’re a starting point, not a rule. The length and the width are your choice.
How to read Bollinger Bands: three ways price meets a band
Touch. A candle’s high reaches the upper band, or its low reaches the lower band. The close can be anywhere.
Close beyond. The candle closes outside the band. Some traders read that as the move carrying on.
Close back inside. A candle closed outside the band, and a later one closes back inside. Some traders read that as the move running out.
The same bands, read three ways, can point in opposite directions. Which reading you use is part of your own rules. John Bollinger himself wrote that a touch of a band isn’t a signal on its own.
Walking the band
In a strong move, price can close outside a band again and again. Traders call this walking the band. Here, eight candles in a row close above the upper band while the bands spread wider. The ninth closes back inside, and the walk ends there.
Some rules count closes in a row beyond a band, and only mark a move once the count reaches a number you set. A close back inside resets the count to zero. The number is your choice.
What counts as a touch, and what doesn’t
It has to reach the line. A high that stops a little under the band isn’t a touch. Some traders allow a small distance, in ticks, and count a candle that gets that close. That distance is your choice.
The bands move too. Each new close changes the average and the spread, so the bands shift while a candle is still forming. Many traders only judge a touch or a close once the candle has closed.
Settings change everything. A 20-candle, 2 standard deviation band and a 10-candle, 1.5 standard deviation band are different lines. A touch on one may not be a touch on the other.
When the bands narrow and widen
In the picture at the top, the bands were narrow during the quiet stretch, then spread wide as price climbed. A long quiet stretch with very narrow bands is often called a squeeze. It describes a quiet market. It doesn’t say which way price will go next, or when. Read about the Bollinger squeeze.
Two readings are built from the bands. %B shows where the close sits between them: 1 at the upper band, 0 at the lower band. Bandwidth is the distance between the bands divided by the middle line, so a squeeze shows as a low number.
Often confused with
Keltner Channels. Bands around an average, set by average true range (how far price moves in a candle, on average) instead of standard deviation.
Moving average envelopes. Bands set a fixed percentage above and below an average, so their width doesn’t change with volatility. Read about envelopes.
VWAP bands. Standard deviation bands around VWAP instead of a moving average. Read about VWAP bands.
Donchian channels. Lines at the highest high and lowest low of the last few candles, with no averages at all.
A Bollinger Bands indicator for TradingView
Have every band touch marked, to your own rules
Tell Wildflower’s Indicator what you want in plain words, like “mark every candle that closes back inside the lower band”. It can mark a candle reaching a band, closing back inside, or closing beyond. You type the length and the width. It marks each one on a chart so you can check it matches your rules, then gives you a script to add to TradingView, with a step-by-step guide.
Try it free. You only pay when you add it to TradingView.
Common questions
What are the standard Bollinger Band settings?
20 candles and 2 standard deviations are the values John Bollinger described, and most charts start there. They’re a starting point, not a rule.
What is the middle Bollinger Band?
A simple moving average of the closes, over the same length as the bands.
What does it mean when price touches the upper band?
Price reached 2 standard deviations (or your chosen number) above its recent average. It describes the move. It doesn’t say what comes next.
Why do Bollinger Bands widen?
The closes have become more spread out, which happens when price moves more.
What is a Bollinger squeeze?
A stretch where the bands are very narrow because price has been quiet. Read more.
What is walking the band?
Price closing outside a band several times in a row during a strong move.
Do Bollinger Bands use SMA or EMA?
The standard version uses a simple moving average. Some platforms let you switch to an EMA, which gives different bands.
What is %B?
Where the close sits between the bands: 1 at the upper band, 0 at the lower, and above 1 or below 0 when it’s outside.
What’s the difference between Bollinger Bands and Keltner Channels?
Bollinger Bands use standard deviation of the closes. Keltner Channels use average true range.