Bollinger Bands Calculator
Category: Technical AnalysisCalculate Bollinger Bands to identify volatility, potential reversals, and price targets using standard deviation-based bands
Price Data Input
Bollinger Bands Parameters
Understanding Bollinger Bands
Bollinger Bands are a versatile technical analysis tool developed by John Bollinger in the 1980s. They consist of a middle band (typically a 20-period moving average) with upper and lower bands placed at standard deviation levels above and below the middle band.
How Bollinger Bands Work
Bollinger Bands consist of three components:
Where n is typically 20 periods and k is usually 2 standard deviations.
The bands expand and contract based on price volatility, providing dynamic support and resistance levels.
Additional Bollinger Band Indicators
- Bandwidth: Measures the width of the bands relative to the middle band. Calculated as: (Upper Band - Lower Band) / Middle Band
- %B (Percent B): Shows where price is in relation to the bands on a scale of 0 to 1, where:
- %B = 1.0: Price at upper band
- %B = 0.5: Price at middle band
- %B = 0.0: Price at lower band
- BandWidth: Can identify "squeezes" (periods of low volatility) that often precede significant price movements
Bollinger Bands Trading Strategies
Band Touches and Bounces
One of the most common strategies is to look for price touches or tests of the bands followed by reversal moves:
Bullish Signal: Price touches or slightly penetrates the lower band and then begins to move higher
Bearish Signal: Price touches or slightly penetrates the upper band and then begins to move lower
This strategy works best in ranging markets rather than strong trends.
Bollinger Band Squeeze
The "squeeze" occurs when volatility falls to a low level and the bands narrow dramatically:
1. Identify periods where the bands narrow significantly (low BandWidth)
2. Watch for the first significant move out of the narrow bands
3. Trade in the direction of the breakout
This strategy aims to capture the beginning of new trends following periods of consolidation.
Riding the Bands
In strong trends, price can "walk the band" by moving consistently along one band:
Uptrend: Price rides the upper band, with pullbacks typically finding support at the middle band
Downtrend: Price rides the lower band, with rallies typically finding resistance at the middle band
Exit when price crosses the middle band in the opposite direction of the trend.
Bollinger Band Divergence
Look for divergence between price movements and %B or bandwidth:
Bullish Divergence: Price makes a lower low, but %B makes a higher low
Bearish Divergence: Price makes a higher high, but %B makes a lower high
Divergences can signal potential reversals, especially when combined with other indicators or chart patterns.
Tips for Using Bollinger Bands Effectively
- Don't use bands in isolation - Combine them with other indicators like RSI, MACD, or volume to confirm signals
- Remember "bands are not boundaries" - Price can and does exceed the bands regularly, especially in trending markets
- Watch for "W" bottoms and "M" tops - These patterns (double bottoms/tops with the second bottom/top holding above/below the lower/upper band) can be powerful reversal signals
- Consider multiple timeframes - Using Bollinger Bands across different timeframes can provide more comprehensive analysis
- Adjust parameters for different markets - While 20-period, 2 standard deviation bands are standard, you may need to adjust these parameters for different markets or timeframes
- Pay attention to band width - Narrowing bands (decreasing volatility) often precede significant price moves, while widening bands indicate increasing volatility
What this calculates
A moving average with bands set a number of standard deviations away.
- Formula
middle = SMA(N); upper = SMA + (k × σ); lower = SMA − (k × σ). Typically N = 20, k = 2- Worked example
- With a 20-period SMA of 1.0850 and σ of 0.0030, the bands sit at 1.0910 and 1.0790.
- When to use it
- To judge whether the current price is unusual relative to its own recent range.
- Common mistake
- Touching a band is not a signal. In a strong trend price rides the upper band for long stretches.