What are Bollinger Bands and how are they calculated?

The middle band is a simple moving average (SMA) of the last 20 closes. The upper band is the middle band plus two standard deviations of those same closes, and the lower band is the middle band minus two. Standard deviation measures how widely prices spread around their average, so the gap between the bands tracks volatility.

A hypothetical example: a stock's last 20 closes average $100.00 with a standard deviation of $1.50, so the bands sit at $103.00 and $97.00. If the standard deviation doubles to $3.00, they move out to $106.00 and $94.00. The bands stretch to fit volatility; nothing else changed.

Fixed-percentage envelopes around an average were common when Bollinger started, and standard deviation lets his bands adapt on their own. He warns against reading statistics into them: prices are not normally distributed, so "two standard deviations" is not a reliable probability that price stays inside.

The middle band works like the averages in the EMA trading strategy guide, only simple rather than exponential. And unlike VWAP bands, which restart every session, Bollinger Bands roll forward with the last 20 bars on any timeframe.

What does it mean when price touches a Bollinger Band?

A touch means price is high, or low, compared with its own recent range. That is all. Bollinger's own rule is that a tag of a band is just a tag, not a signal: touching the upper band is not a sell signal, and touching the lower band is not a buy signal.

In a strong trend, price can walk the band: it tags the upper band again and again while its pullbacks stall near the middle band. Say a hypothetical stock climbs from $118 to $124 in a morning, with about a dozen 5-minute candles closing at or near the upper band. Shorting every "overbought" tag meant a string of losses. Bollinger adds that a close outside the bands is at first a continuation sign, not a reversal sign.

So a tag is a question, not an answer. Bollinger suggests checking it against indicators that are not closely related, such as one momentum and one volume indicator rather than two momentum ones. Ask four things at every tag:

  • Trend: is the middle band sloping strongly? A tag in the direction of the slope is usually strength.
  • Close: did the candle close back inside the band, or outside it?
  • Level: is there a support or resistance level, a prior high or low, or VWAP at the tag?
  • Confirmation: do volume and a momentum reading such as the RSI tell the same story?

What is the Bollinger Band squeeze?

The squeeze is a stretch of unusually narrow bands: volatility dries up, candles shrink and price drifts sideways. Quiet stretches tend to give way to active ones, so a squeeze warns that a bigger move may be coming. It does not say which way, and it can last longer than you expect.

Bollinger measures it with BandWidth, covered below: a squeeze is BandWidth near the lowest it has been over a long stretch of its own history. There is no universal threshold; TradingView notes that the level differs by symbol and timeframe.

Direction comes from the break: a candle that closes outside the band, ideally on above-normal volume. A hypothetical 5-minute example: a stock coils between $49.60 and $50.10 for about an hour, then a candle closes at $50.30, above the upper band, on about twice the average volume. You buy at $50.30 with a stop at $49.80, back inside the range, risking $0.50 a share, and aim for $51.30, twice the risk. The drawing shows the price side of it: a tight range, then a close above it on a jump in volume.

The failed version is common. Two candles later, price closes back inside the range at $49.90 and the stop at $49.80 is hit: a loss of $0.50 a share, or $50 on 100 shares. Then price closes below the lower band and the real move goes down. Bollinger calls a false first move like this a head fake. Waiting for the close, a stop where the idea is clearly wrong and a size that can absorb the loss are what make the squeeze tradeable. The breakout trading strategy guide goes deeper.

Turn your phone sideways to read the drawing. Tap to close.

Price coils inside a tight range box labeled squeeze, then a candle closes above the box on a volume spike and a buy signal prints, labeled breakout.

Bollinger Bands strategy: mean reversion or breakout?

The bands support opposite ways of trading, and each one fails where another works. So first decide which market you are in: a flat middle band with steady band width is a range, a sloping middle band with price riding one band is a trend, and bands pinching together are a squeeze.

  • Mean reversion, in ranges: fade a tag toward the middle band, but only after a candle closes back inside the band, ideally at support or resistance. It fails when the range turns into a trend and price starts walking the band.
  • Trend pullback, in trends: buy a pullback that holds the middle band and closes back up, as in the pullback trading strategy. It fails when a pullback closes through the middle band and the slope flattens, often the first sign the trend is tiring.
  • Breakout, after a squeeze: trade a close outside the band on rising volume. It fails in chop, where breaks turn into head fakes, and it comes late once the bands are already wide.

How to trade a lower-band bounce at support

A tag works best as a mean-reversion trade when the band lands on a level other traders watch. A hypothetical range day on a 15-minute chart: the middle band is flat at $75.00 and the lower band sits at $74.20, right on yesterday's low. A candle dips to $74.05 and closes back inside at $74.40, a hammer at support. You buy at $74.40 on the next open with a stop at $73.95, under the wick and the level: $0.45 of risk per share. The middle band is $0.60 away, about 1.3 times the risk, and the upper band near $75.80 about three times. The drawing shows the level side of it: a dip into support, a rejection, a signal on the close.

The failed version: the candle closes at $73.90 instead, below the lower band, on rising volume, and the bands start to widen. That is no bounce but possibly the start of a walk down the band, so there is no long. Had you bought the touch before the close, your stop at $73.95 would already be hit.

Put the stop at a fixed price beyond the wick or the level, never "at the band", which moves every bar and widens just as price runs against you. Then size from that stop: a $25,000 account risking 1%, or $250, at $0.45 of risk per share buys about 555 shares. The stop loss and take profit and risk-reward ratio guides and the position size calculator cover the math.

Turn your phone sideways to read the drawing. Tap to close.

A resistance zone above and a support zone below; price dips into support, gets rejected and a buy signal prints.

%B and BandWidth: two indicators built from the bands

%B shows where price sits inside the bands: %B = (price − lower band) ÷ (upper band − lower band). It reads 1 at the upper band, 0.5 at the middle band and 0 at the lower band; above 1 or below 0 means price is outside the bands. With the bands at $103.00 and $97.00, a price of $101.50 gives %B = 4.50 ÷ 6.00 = 0.75.

%B helps you write clear rules and spot the M tops and W bottoms Bollinger describes. In an M top, price makes a new high but %B stays below 1: the second push no longer reaches the upper band, so momentum is fading. Like the double top in chart patterns, it still needs a break of support to confirm.

BandWidth measures how wide the bands are: (upper band − lower band) ÷ middle band, multiplied by 100 on TradingView. With the bands at $103.00 and $97.00 around $100.00, BandWidth is 0.06, shown as 6. A squeeze is BandWidth near the bottom of its own history; an expansion is a sharp rise.

%B
Where price sits relative to the bands: 1 at the upper band, 0.5 at the middle, 0 at the lower band.
BandWidth
The distance between the bands divided by the middle band. Low readings mark a squeeze.
Squeeze
A stretch of unusually narrow bands, a sign of low volatility. It does not tell you the direction of the next move.
Head fake
Bollinger's term for a first break out of a squeeze that reverses before the real move goes the other way.

What are the best Bollinger Bands settings for day trading?

Start with the defaults, 20 periods and 2 standard deviations, which Bollinger calls a starting point that may not suit every market. If you change the length, he suggests adjusting the multiplier so the bands contain price as consistently: about 1.9 standard deviations for 10 periods and 2.1 for 50. Pick a length that describes the trend you trade, not one that happened to fit past charts.

Intraday, the bands carry over from the day before, so the first bars after the 9:30 a.m. ET open (see US stock market hours) are measured against the prior afternoon, and a gap stretches them for a while. Keep extended hours always on or always off, since pre-market bars change the math (see the best TradingView settings), and check a higher timeframe first, as in multi-timeframe analysis.

The bands work on any bar length, from 5 minutes to weekly, as long as each bar has enough trading in it, so stick to liquid stocks and ETFs. The timeframe sets how much history the 20 bars cover:

  • 5-minute chart: the last 100 minutes, a short-term read on the current session.
  • 15-minute chart: 5 hours, most of one regular session.
  • 1-hour chart: about three regular sessions.
  • Daily chart: about a month of trading.

How to add Bollinger Bands in TradingView

Bollinger Bands are built into TradingView and free on every plan. They also appear on most lists of the best TradingView indicators.

  1. Open a chart of a liquid stock or ETF, for example SPY on the 5-minute timeframe.
  2. Click Indicators in the top toolbar, search for Bollinger Bands and pick the built-in version by TradingView.
  3. Click the gear icon next to the indicator name to open Settings. The Inputs tab shows Length (20), Basis MA Type (SMA), Source (close), StdDev (2) and Offset (0). Keep the defaults to start.
  4. On the Style tab, set the colors of the Basis (middle band), Upper and Lower lines and the background fill.
  5. For the two derived indicators, search Indicators for Bollinger Bands %B and Bollinger BandWidth. Each opens in its own pane below the chart.
  6. To be told when price closes outside a band, create an alert on the indicator and choose Once Per Bar Close. The TradingView alerts guide walks through it.

Common Bollinger Bands mistakes

Like every indicator, the bands are wrong often. Most losses come from a few habits, and the fix is always a level, a closed candle, a stop and a planned size. The technical analysis for beginners guide shows where the bands fit in a full plan.

  • Selling every upper-band tag and buying every lower-band tag. In a trend, that means fighting the market bar after bar.
  • Reading two standard deviations as a probability. Prices are not normally distributed; the bands describe, they do not predict.
  • Guessing the direction of a squeeze. Wait for a close outside the band, and expect some breaks to be head fakes.
  • Acting before the candle closes. The candle and the bands move with every trade until the bar closes, the same reason indicators that signal early can repaint.
  • Putting the stop at the band. It moves every bar and widens against you; use a fixed price beyond the wick or the level.
  • Stacking similar indicators. The RSI and the MACD both measure momentum, so the second rarely adds anything. Pick one and add volume instead.

Where UpTickFlow fits

UpTickFlow is our invite-only TradingView indicator, so weigh this accordingly. It does not plot Bollinger Bands or detect squeezes, %B or BandWidth signals. It waits for a candle to close at a level, scores the setup from 0 to 100 (only A+ setups show) and draws the entry, stop and target before the trade. It stays quiet in chop, in the first minutes after the open, in the midday lull and in the last 30 minutes.

Use it next to the bands as a second check that a level is worth trading, not as a band scanner: if a lower-band tag lands on a level and UpTickFlow stays silent, look again. It works on a free TradingView account and costs $19 every 30 days, as shown on the pricing page.