Q: Tips

- The default 20-period, 2-StdDev setting captures ~95% of price action within the bands - Use %B for quantitative overbought/oversold analysis instead of visual band touches - Bandwidth is excellent for detecting Bollinger Squeeze setups — look for historically low values - In strong trends, do not fade the band — price can "walk the band" for extended periods - Combine with volume indicators to confirm breakouts from squeezes - Narrowing bandwidth followed by expansion is one of the most relia

Question 1

What is Bollinger Bands?

Accepted Answer

Bollinger Bands is a volatility indicator developed by John Bollinger in the 1980s. It consists of three lines: a middle band (simple moving average), an upper band, and a lower band. The upper and lower bands are placed at a specified number of standard deviations above and below the middle band, dynamically expanding and contracting based on market volatility.

Question 2

How it works

Accepted Answer

Bollinger Bands are calculated using a moving average and standard deviation: ``` Middle Band = SMA(close, N) Upper Band = Middle Band + K * StdDev(close, N) Lower Band = Middle Band - K * StdDev(close, N) ``` Where N is the period (default 20) and K is the multiplier (default 2.0). Two additional sub-components provide normalized readings: ``` %B = (close - Lower Band) / (Upper Band - Lower Band) Bandwidth = (Upper Band - Lower Band) / Middle Band ``` **%B** shows where price is relative to the

Question 3

Key features

Accepted Answer

- **Squeeze** — When bands contract tightly, it signals low volatility and often precedes a breakout - **Expansion** — Wide bands indicate high volatility - **Walking the band** — During strong trends, price can stay near the upper or lower band - **Mean reversion** — In ranging markets, price tends to return to the middle band - **%B overbought/oversold** — %B above 1.0 means price is above upper band; below 0.0 means below lower band

Question 4

Buy signals

Accepted Answer

- Price touches or crosses below the lower band and reverses back inside - %B crosses above 0 from below (price re-enters bands from below) - Bollinger Squeeze followed by price break above upper band - Price bounces off the middle band in an uptrend

Question 5

Sell signals

Accepted Answer

- Price touches or crosses above the upper band and reverses back inside - %B crosses below 1 from above (price re-enters bands from above) - Bollinger Squeeze followed by price break below lower band - Price fails to hold the middle band in a downtrend

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Number of candles for SMA and StdDev | | Multiplier (K) | 2.0 | Standard deviation multiplier |

Question 7

Sub-components

Accepted Answer

| Component | Description | |-----------|-------------| | `BB_UPPER(20)` | Upper band value | | `BB_LOWER(20)` | Lower band value | | `BB_PERCENT_B(20)` | %B — normalized position within bands | | `BB_BANDWIDTH(20)` | Bandwidth — relative band width |

Question 8

Example conditions

Accepted Answer

| Condition | Description | |-----------|-------------| | `close > BB_UPPER(20)` | Price above upper band (breakout) | | `close 1` | Price exceeded upper band | | `BB_PERCENT_B(20) < 0` | Price below lower band | | `BB_BANDWIDTH(20) < 0.05` | Squeeze — very narrow bands |

Question 9

Tips

Accepted Answer

- The default 20-period, 2-StdDev setting captures ~95% of price action within the bands - Use %B for quantitative overbought/oversold analysis instead of visual band touches - Bandwidth is excellent for detecting Bollinger Squeeze setups — look for historically low values - In strong trends, do not fade the band — price can "walk the band" for extended periods - Combine with volume indicators to confirm breakouts from squeezes - Narrowing bandwidth followed by expansion is one of the most relia