Bollinger Bands in Plain English
What the upper, middle, and lower bands actually tell you — and the mistake everyone makes with them.
· 5 min read · indicator, bollinger, volatility
Bollinger Bands wrap a moving average in a volatility envelope — typically 20-SMA ± 2 standard deviations. When volatility rises, the bands widen; when it falls, they squeeze.
Bollinger Bands chart showing a narrow squeeze region where volatility is low, followed by band expansion and price breaking higher.
The mistake
"Price hit the upper band, so sell." Wrong. In trending markets, price walks along the upper band for long stretches. Touching the band is not a signal by itself — it describes volatility, not direction.
What actually works
- Squeeze: narrow bands = low volatility = impending expansion. Trade the breakout direction.
- Walking the band: in strong trends, pullbacks to the 20-SMA (middle) are entries, not exits.
- Mean reversion in ranges: in a clear range, fade touches of the outer bands.
- Width shift: widening bands with a clean trend = conviction; widening bands with overlap = chop.
The mental model
Think of bands as a speedometer, not a steering wheel. They tell you how fast the market is moving, not where it is going. Combine with structure and a momentum indicator for direction.