Trends/Volatility and bands

Bollinger bands

A moving average with a band above and below it that widens when price swings more and narrows when it calms down.

Volatility and bandsBest on 3M, 6M, 1YAlso called BB

Illustration of the Bollinger bands shape. It is a sketch, not real price data.

What it shows

Bollinger bands have three lines. The middle line is a 20-bar simple moving average. The upper and lower lines are 2 standard deviations above and below it. Standard deviation is a measure of how far prices have strayed from their average over those 20 bars.

Because the width follows recent swings, the bands expand in busy periods and tighten in quiet ones. John Bollinger created them in the 1980s.

How we find it

The same code that draws it on your chart follows these steps, with the same result every time.

Compute the 20-bar SMA of the close (middle line).
Compute the standard deviation of the last 20 closes.
Upper line = middle + 2 × standard deviation.
Lower line = middle − 2 × standard deviation.

Starting values: Length 20; Width 2 standard deviations. These are proposed and will be tuned on real price data before launch.

How to read it

The gray line is the 20-bar average. Blue lines are the bands.
About 95% of closes would be inside the bands if prices followed a bell curve, but real prices often stray more.
A touch of a band is a fact about distance from the average, not a turn signal.

Status labels you may see

Label	What it means
Inside the bands	Close is between the lines.
At the upper band	Within 1% of the upper line or above it.
At the lower band	Within 1% of the lower line or below it.

What cancels it

Nothing cancels it.

What traders check next

Whether the bands are wide or narrow compared with the recent past.
Whether price is walking along a band or bouncing off it.
The slope of the middle line.

Limits

Price can stay at a band for a long time in a strong trend.
The 2 deviation width is a convention.
The bands lag, since they use past closes.

Try it in forecastviz

Open any ticker and choose Volatility and bands → Bollinger bands in the left menu.
Switch between 3M, 6M, 1Y to see how the picture changes.
Compare with Bollinger %B and Bollinger bandwidth on the same chart.

Open on a ticker

Questions

Does touching a band mean price will reverse?

No. In strong moves price can ride along a band.

Why 20 and 2?

They are the standard settings from the creator.