Bollinger Bands consist of three lines: a middle line that is typically a simple moving average (SMA) over a set period, and an upper and lower band plotted a number of standard deviations above and below the SMA. The standard deviation parameter makes the bands widen or contract with volatility; common defaults are a 20‑period SMA and bands at 2 standard deviations, but traders may adjust these settings to fit the time frame or instrument.
Price movement relative to the bands is observed to assess volatility and price extent. When volatility rises, the bands widen; when volatility falls, they narrow. A price approaching or touching the upper band during periods of expanding bands can indicate continued strength in the short term, while touching the lower band during widening bands can indicate weakness. A band squeeze—where the bands come close together—often precedes a period of higher activity, though the direction of the move is not predictable from the squeeze alone. The middle band frequently acts as a dynamic reference line that can resemble a moving average acting as support or resistance for price.
Bollinger Bands are retrospective tools that describe price relative to a moving average and recent volatility. They are most useful when combined with additional analysis to form a view on price behavior, since a move beyond a band does not guarantee a sustained outcome and settings influence interpretation.
In a chart, the price tests the lower Bollinger Band during a pullback, and the bands begin to widen as volatility increases, bringing the price toward the middle band.
Moving Average · Standard Deviation · Volatility · Bollinger Band Squeeze · Keltner Channels · Price Channel