Bollinger Bands

Bollinger Bands plot a moving average (typically 20 periods) with two outer bands set 2 standard deviations above and below it. The bands automatically widen during high volatility and contract during low volatility. About 95% of price action happens within the bands. The bands are best used as a volatility map, not a buy/sell signal. When the bands are tight (low volatility, called a "squeeze"), a big move is usually coming. When the bands are wide, the market is in an active trend or news event. Touches of the upper or lower band aren't automatic reversal signals — in strong trends, price can ride the band for days. The most reliable Bollinger setup is the squeeze: when bands contract to a multi-week low, a breakout follows within a few sessions. The direction of the breakout usually matches the higher timeframe trend.