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Bollinger Bands explained: what the squeeze really tells you

Bollinger Bands are the two lines that hug price and stretch wider when the market gets busy. They tell you how calm or wild price has been. They don't tell you which way it goes next.

Beginner guide · 7-minute read · Updated 2026-10-21

What Bollinger Bands are

Bollinger Bands are three lines drawn on the price chart. John Bollinger made them popular in the 1980s.

• The middle line is a 20-candle simple average of the closing price.
• The upper band sits 2 "standard deviations" above that average.
• The lower band sits 2 standard deviations below it.

That's the default almost everywhere: 20 and 2.

Standard deviation, in plain words

Standard deviation is a math word for how spread out the numbers are.

If the last 20 closes were all close to the average, the spread is small. The bands sit close to price.

If the closes were all over the place, the spread is big. The bands move far apart.

So the bands are a picture of Volatility: how much price has been jumping around lately.

A simple example

Say the last 20 closes average 100.

• On a quiet stretch, the standard deviation might be 1. The bands sit at 98 and 102.
• On a busy stretch, it might be 4. The bands sit at 92 and 108.

Same average. Very different bands. Nothing about the average changed. Only how far price has been swinging.

(Your charting app does all this math for you. You only need to know what it means.)

What the bands do and don't tell you

Here's the thing.

Many guides say "price at the upper band means sell, at the lower band means buy". That's not what the bands measure.

A close outside a band only says: this candle was unusual compared with the last 20. It doesn't say the move is done.

In a strong trend, price can "walk the band". It closes near or above the upper band again and again while it keeps climbing. Selling every touch means selling into strength.

The squeeze

This is the part most people find useful.

When price goes quiet, the bands pinch close together. Traders call it a squeeze.

Quiet stretches don't last forever. After a squeeze, price often makes a bigger move. But here's the catch: the squeeze doesn't tell you the direction. It can break up or down. It can also break one way, fail, and run the other way.

So a squeeze is a heads-up to pay attention, not a reason to act. See breakout vs fakeout for how to judge the move that comes after.

Two numbers some traders read

• %B shows where the close sits inside the bands. 1 means at the upper band, 0 at the lower band, 0.5 at the middle.
• Bandwidth shows how wide the bands are, as a share of the middle line. Low bandwidth means a squeeze.

Both come straight from the same 20/2 bands. They don't add new information. They just put it in a number.

How traders use Bollinger Bands

• In a range. When price moves sideways, the bands can line up with the floor and ceiling. Some traders look for turns near the outer bands. This is a mean reversion idea, and it fails when the range breaks.
• In a trend. Some traders treat the middle line as a rough guide. In an uptrend, pullbacks often stall near it. Often, not always.
• After a squeeze. Some traders wait for a candle body to close outside the band after a squeeze, then check the bigger chart for direction.
• As a volatility gauge. Wide bands mean bigger swings, so a sensible Stop loss needs more room. Room means smaller size.

Where it fits with our method

We start with the chart's turning points: the last places price turned around. Higher highs and higher lows mean an uptrend.

The bands can add one useful fact on top: how busy is the market right now?

• Bands wide apart: swings are big. Your stop will be farther away. Your size must be smaller to keep the same risk. Use the position size calculator.
• Bands pinched: the market is quiet. A bigger move may be coming. Wait for a candle body to close past a marked level. A wick poking through doesn't count.

The bands never overrule the turning points. If price is making higher highs and higher lows, a touch of the upper band isn't a reason to bet against it.

Common mistakes

• Treating a band touch as a reversal signal. In a trend, price can ride the band for a long time.
• Guessing the squeeze direction. The pinch says "something may move", not "up" or "down".
• Stacking bands with three other indicators. They're mostly built from the same closes. More lines, same information.
• Changing 20 and 2 until it fits last month. That's fitting the past. It rarely holds on new charts.
• Forgetting that wider bands mean smaller size. The same 1% risk needs a smaller position when the stop is farther away.

Try it today on TradingView

About 10 minutes. Phone or computer.

1. Open a daily chart. Add "Bollinger Bands" from Indicators (default 20, 2).
2. Find a stretch where price walked the upper band. Count how many candles closed near it while the trend kept going.
3. Find the tightest squeeze in the last year. Mark where it was.
4. Use bar replay to go back to just before that squeeze ended. Guess the direction, write it down, then step forward.
5. Note in your trading journal whether your guess was right. Do this 10 times and look at the list.

Questions