Bollinger Bands
Original schematic showing the guide's principal visual relationships.
Formula and components
A moving average surrounded by volatility bands based on standard deviation.
Middle = SMA(20); Upper/Lower = SMA ± 2 × rolling standard deviation.
How it works
The indicator transforms price, range, or volume observations over a selected lookback. Shorter settings react faster but create more noise; longer settings respond more slowly and emphasize the underlying regime. Always compare the reading with price structure and timeframe.
How to read it
Band expansion shows rising volatility, contraction shows compression, and price walking a band can confirm trend strength rather than reversal.
Confirmation checklist
Compare the current range with its own history and distinguish expansion from direction. Volatility can increase during both advances and declines.
Limitations and false signals
A band touch is not inherently overbought or oversold. Standard-deviation assumptions and default settings vary by market.