What Do You Need to Know About Bollinger Bands?
An educational overview of Bollinger Bands, covering the middle band, standard deviation bands, squeeze, expansion, price interaction, and trend limitations.
- 7 min read
- For beginners
- Educational
- Bài học 1 trên 6
This unit shifts focus from the momentum oscillators covered earlier in this group (MACD, RSI, KDJ) to Bollinger Bands, a volatility-based indicator developed by John Bollinger in the early 1980s.
This overview introduces five areas covered in this unit: the middle band and standard deviation bands, the band squeeze, expansion and volatility, price interaction with the upper and lower bands, and important limitations during strong trends.
This is general educational content. It does not suggest that Bollinger Bands, on their own, provide a guaranteed trading signal.
What Are Bollinger Bands?
Bollinger Bands consist of three lines plotted on a price chart: a middle band (a moving average) and an upper and lower band positioned a set distance from that middle band, based on standard deviation — a statistical measure of how spread out prices are from their average.
A Different Approach from Momentum Oscillators
Unlike MACD, RSI, and KDJ (covered in the previous units), which are momentum oscillators measuring the speed and direction of price change, Bollinger Bands are primarily a volatility indicator, directly visualizing how much price is currently deviating from its recent average.
What's Covered in This Unit
- Middle band and standard deviation bands — the core construction of the indicator.
- Band squeeze — a period of contracting bands reflecting low volatility.
- Expansion and volatility — how the bands widen as volatility increases.
- Price interaction with upper and lower bands — how price is commonly discussed as behaving relative to the bands.
- Limitations in strong trends — an important closing perspective on this popular indicator.
Summary
Bollinger Bands are a volatility indicator consisting of a middle moving average and upper/lower bands based on standard deviation, offering a different perspective from the momentum oscillators (MACD, RSI, KDJ) covered earlier in this group. This unit explores the indicator's construction, the squeeze and expansion concepts, price interaction with the bands, and important limitations during strong trends.
Frequently Asked Questions
Three lines plotted on a price chart — a middle moving average and an upper/lower band positioned based on standard deviation from that average.
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