Bollinger bands
A moving average with bands two standard deviations away. They show volatility cycles.
What it is
Bollinger bands plot a 20-period average with bands two standard deviations above and below. When volatility falls, the bands tighten (a squeeze); when it rises, they widen. Price closing outside a band signals strong momentum, not an automatic reversal.
Squeezes often precede big moves. The direction is not given by the bands: wait for a break and confirmation.
How to use it
- Identify a squeeze (narrowest bands in many bars).
- Wait for a break with volume and a close outside.
- In ranges, fade the outer bands back to the middle.
- Use the middle line as a trend guide.
Bands measure volatility; they do not choose direction.
Common mistakes
- Shorting every touch of the upper band in an uptrend.
- Guessing the direction of the breakout.
- Using different settings on every chart.
Practise it in TradeDesk X
The Bollinger 20·2 layer is available on the TradeDesk X chart and in the Micro layers.
Related lessons
🕯
Inside bar breakout
A candle inside the previous candle’s range marks a pause. The break shows the next direction.
📈Range trading
When price moves sideways, buy near the bottom and sell near the top. Step aside when it breaks.
Educational content only. Nothing here is financial advice or a recommendation to buy or sell anything. Trading leveraged products can lose more than you deposit. Practise with paper trading first and never risk money you cannot afford to lose.