What are Bollinger Bands? A plain-English guide
By SendPay Business · · 2 min read
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Bollinger Bands are a chart tool, created by John Bollinger in the 1980s, that draws a band around a price based on how much it has been moving. They are widely used on forex, crypto and share charts to show volatility at a glance.
The three lines
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Middle band
the simple moving average of the last 20 closing prices.
Upper band
the middle band plus two standard deviations of those closes.
Lower band
the middle band minus two standard deviations.
Width shows volatility
When prices swing more, the standard deviation grows and the bands move apart. When the market goes quiet, they narrow. A very narrow stretch is often called a squeeze, because quiet periods are frequently followed by bigger moves, though the bands don't say which direction.
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%B and bandwidth
%B places the latest price between the bands: 0 means it is on the lower band, 1 on the upper band, and 0.5 on the middle. Bandwidth is the gap between the outer bands as a share of the middle band, which makes it easy to compare how volatile a market is now with how it was before.
The limits
A price touching the upper band isn't automatically too high, and touching the lower band isn't automatically cheap; in strong trends prices can ride along a band for a long time. Like all chart tools, the bands describe past prices and don't predict future ones.
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Questions people ask
How do I work out Bollinger Bands?
Paste closing prices into the free calculator.
Bollinger Bands calculator →Read next
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.