Bollinger bands

What it means

Bollinger bands are three lines: a simple moving average of the closes, and a band each side of it placed a number of standard deviations away. Conventionally that is twenty bars and two standard deviations.

Because the offset is a standard deviation, the bands widen when recent closes have been scattered and narrow when they have been tightly grouped. The distance between them is a volatility measurement.

How we detect it

The engine computes the bands with the conventional twenty-bar, two-deviation settings, and uses them for exactly one thing: the bandwidth series that the compression and expansion read is built from.

It does NOT treat a touch of a band as an event. There is no detection here for price reaching the upper band, closing outside it, or walking along it.

That omission is a decision. A band touch is a statement about the last twenty closes, not about a level anyone is defending, and this product's level vocabulary comes from swing clusters instead.

When the read carries information

• There are enough closes for the moving average and the deviation to be defined at all.
• The interest is in the width. That is the only question the engine asks of these bands.
• The instrument's price series is clean; a standard deviation is easily distorted by a bad print.

When it misleads

• A standard deviation assumes a distribution that market returns do not have, so the proportion of closes falling outside the bands is not the textbook number.
• In a strong trend price can sit on a band for many bars, which readers often mistake for a level being tested.
• The bands are a lagging construction: they widen after the volatility arrives, never before it.

How it reaches you

A reader will not see Bollinger levels quoted on our surfaces. What they will see is the compression or expansion state that the bandwidth produces.

The bands are a measurement, and this publication never turns one into an instruction.