What is Bollinger Bands?
Bollinger Bands place upper and lower bands around a moving average, typically ±2 standard deviations. Band width reflects recent volatility.
Formula
Middle Band = 20-period SMA Upper Band = 20-period SMA + (2 × 20-period standard deviation) Lower Band = 20-period SMA − (2 × 20-period standard deviation) Bandwidth = (Upper Band − Lower Band) / Middle Band %B = (Price − Lower Band) / (Upper Band − Lower Band)
Indian market context (NSE)
Reference levels: Nifty 50 at 24,300, Reliance Industries at ₹1,300, Bank Nifty futures at 55,000 (lot size 30). Examples below show how Bollinger Bands shows up on Indian index, equity, and futures books — update to live quotes in your journal.
Nifty 50 perspective
Bollinger Bands on Nifty (24,300): on the 15-minute chart, combine with session VWAP and 9:15–10:00 liquidity — index bollinger bands signals misfire on expiry Tuesdays without volume confirmation.
Reliance Industries perspective
Bollinger Bands on Reliance at ₹1,300: daily vs hourly settings diverge around results and ex-dividend dates; note corporate events in journal when bollinger bands readings spike.
Bank Nifty futures perspective
Bollinger Bands on Bank Nifty futures (55,000): first-hour signals differ from post-14:30 behaviour; avoid standalone entries when banking names lead the move.
How to validate
- Forward-test Bollinger Bands on paper or sim for two weeks after rule changes.
- Validate only on trades where Bollinger Bands settings matched the written playbook.
- Split results by trending vs range weeks on Nifty before trusting the signal.
- Require higher-timeframe bias agreement if that is part of your rule.
How to track in TradeLyser
- Add Bollinger Bands reading to trade entry notes (value + timeframe).
- Create tags: “Bollinger Bands aligned” / “Bollinger Bands ignored”.
- Monthly: filter trades by alignment tag and compare win rate and avg R.
- Screenshot chart context for mentor review on disputed trades.
Best practices
- Combine Bollinger Bands with higher-timeframe bias — not as a lone trigger.
- Avoid curve-fitting settings on less than three months of tagged data.
- Refresh playbook screenshots when changing Bollinger Bands parameters.
- Skip trading when Bollinger Bands conflicts with written risk limits.
Common pitfalls
- Treating Bollinger Bands as a guaranteed reversal signal.
- Optimising parameters on one bullish month only.
- Trading against higher-timeframe bias because Bollinger Bands “said so”.
- Failing to log when you overrode Bollinger Bands discretionally.
How to use this in TradeLyser
Note band width percentile in trade journal during squeezes. Compare results for fade trades vs breakout trades after expansion.
Related terms
A moving average is the average price over N bars, recalculated each period. Simple (SMA) weights periods equally; exponential (EMA) weights recent prices more.
Relative Strength Index compares average gains to average losses over a lookback (commonly 14). Readings above 70 and below 30 are traditional extreme zones — not automatic reversal signals.
Volatility quantifies variability — in prices (historical/realised) or in option premiums (implied). Higher volatility means wider expected swings over a horizon.
FAQ
What do Bollinger Bands tell you?
Bollinger Bands show whether price is high or low on a relative basis by measuring volatility. Narrow bands signal low volatility and a potential breakout; wide bands signal high volatility that may be exhausting.
What are the default settings for Bollinger Bands?
The default settings are a 20-period simple moving average with upper and lower bands at 2 standard deviations. The 20-period default corresponds to roughly one trading month on a daily chart.
Is a price touch of the upper Bollinger Band a sell signal?
Not automatically. In strong uptrends, price can walk the upper band for days or weeks — repeated touches are bullish continuation signals. A band touch is only a reversal signal when confirmed by a reversal candle and weak momentum.
What is a Bollinger Squeeze?
A Bollinger Squeeze occurs when bandwidth falls to a multi-month low, indicating compressed volatility. It signals that a large directional move is imminent, though it does not predict direction on its own.
How is %B calculated in Bollinger Bands?
%B = (Price − Lower Band) / (Upper Band − Lower Band). A value of 1.0 means price is at the upper band, 0 means it is at the lower band, and values above 1.0 or below 0 indicate a band pierce.
Start journaling with
TradeLyser
Connect your broker, tag strategies, and review performance with AI-assisted insights.