Bollinger Band Squeeze — Trading Wiki

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What Bollinger Band Squeeze means

A Bollinger Band squeeze describes a narrow distance between the bands relative to a selected comparison period. It reflects lower measured volatility, without specifying the direction or size of the next move.

In depth

Bollinger Bands place upper and lower bands around a moving average using a selected measure of price dispersion. A commonly used setup is a 20-period simple average with bands two standard deviations away, but settings vary. A squeeze describes relatively narrow bands compared with a stated lookback. It does not establish when volatility will increase, which direction price will move or how far. Past price distributions need not be normal, and the bands are not a guaranteed probability interval. Record the calculation and comparison period before evaluating later candles; avoid choosing a squeeze only after seeing a large move.

Key points

• Narrow bands describe lower recent volatility; they do not establish when a breakout will occur
• A break outside a band is an observation that can continue or reverse
• Volume provides another observation, without validating a future move

Why it matters when you are learning

Compare the bandwidth over a stated sample. Narrow bands describe recent price dispersion, without storing physical energy or identifying the next move’s size or direction.

Worked exercise and its limits

Compare band widths calculated over the same interval and settings on a separate dataset. Label the narrow period before inspecting what followed. Draw both upward and downward outcomes; narrow bands do not supply a direction or deadline.