Bollinger Bands lab
Understand that Bollinger Bands measure volatility rather than direction, and see why "price touched the band" is not a signal.
Runs entirely in your browser — nothing you type is sent anywhere. Educational only, and not investment advice.
How to use this calculator
Each step names a control you will find on screen above.
- Period
The number of sessions in the middle moving average. Twenty is standard and there is nothing special about it.
- Standard deviations
How far the bands sit from the middle. At two, price stays inside roughly nine days in ten — so a touch is a routine event, not a rare one.
- Find a squeeze
Look for where the bands pinch tightly together. Low volatility clusters and is followed by high volatility, which makes the squeeze the most useful feature here.
- Note that the squeeze has no direction
A squeeze says a big move is coming. It says nothing whatsoever about which way, and pretending otherwise is where people lose money with this indicator.
Worked example: The squeeze and what follows
Standard 20-period, 2 standard deviation settings. Find the narrowest point on the chart.
What to enter
- Period
- 20
- Standard deviations
- 2
What it shows you
- Price inside the bands
- roughly 9 sessions in 10
- Touches per month
- Several — routine, not rare
- At the squeeze
- Bands at their narrowest
- What follows a squeeze
- An expansion — direction unknown
- At 3 standard deviations
- Touches become genuinely uncommon
Where this is taught
A calculator gives you a number. These explain what the number means and when it misleads you.
- Technical Analysis10 minBollinger Bands and measuring volatilityBands that adapt to volatility, the squeeze that precedes big moves, and why ATR should decide your stop distance.
- Technical Analysis11 minThe squeeze: quiet before the moveVolatility contracts and expands in cycles. When a chart goes unusually quiet, something is usually being built — though the direction is not in the signal.
- Technical Analysis14 minThe two-sigma promiseThe band is supposed to contain about 95% of observations. You counted a year of them and got nothing like 95%, and the three worst days each moved further than the model says should happen in a working lifetime. The bands were computed correctly. The 95% was never about your stock.
- Technical Analysis13 minTwo volatility numbers for one stockTwo people apply the same 1% risk rule to the same stock on the same evening and end up with positions 60% apart. Both said they were allowing two units of volatility. They were using two different estimators and one word.
- Technical Analysis11 minEvery stock has a personalityThe same setup behaves differently on different instruments. Knowing how a stock habitually moves is an edge that only comes from watching the same names for years.