Bollinger Bands
Volatility bands placed above and below a moving average.
Definition
Bollinger Bands are a volatility indicator consisting of a middle moving average with an upper and lower band set a number of standard deviations away. The bands widen when volatility rises and contract when it falls. Assetick shows the upper, middle and lower band values on each stock's detail page.
How it is calculated
The middle band is typically a 20-period simple moving average. The upper and lower bands sit two standard deviations above and below it. Because standard deviation measures volatility, the band width itself is a useful volatility gauge.
How to read it
Price touching the lower band can indicate an oversold condition; touching the upper band, overbought. Very narrow bands (a 'squeeze') often precede a sharp move, though they do not reveal its direction. Price can 'walk the band' in a strong trend, so touches are not automatic reversal signals.
For DSE investors
Assetick's scanner has a 'Bollinger oversold' preset that finds DSE stocks trading at or below their lower band, and a 'low volatility' preset that surfaces squeeze candidates. These pair naturally with the volatility view on each stock page.
Frequently asked questions
What does it mean when Bollinger Bands narrow?+
Narrowing bands, called a squeeze, indicate falling volatility and often precede a sharp price move. The squeeze does not tell you which direction the move will take.
Is touching the upper band a sell signal?+
Not automatically. In a strong uptrend, price can ride along the upper band for an extended period. A band touch is context, not a standalone signal.