Bollinger Bands Indicator Bulge and Squeeze Analysis

The Bollinger Bands are self adjusting which means the bands widen and narrow depending on price volatility.

Standard Deviation is the statistical measure of the price volatility used to calculate the widening or narrowing of the trading Bollinger bands. Standard deviation will be higher when prices are changing significantly and lower when the stock market prices are calmer.

• When price volatility is high the Bollinger Bands widen.
• When price volatility is low the Bollinger Bands narrows.

The Bollinger Band Squeeze

Narrowing of trading Bollinger Bands is a sign of price consolidation and is known as the Bollinger band squeeze.

When the Bollinger Bands indicator show narrow standard deviation it is usually a time of price consolidation, and it is a signal that there will be a price breakout and it shows traders are adjusting their trade positions for a new move. Also, the longer the prices stay within the narrow bands the greater the chance of a price break-out.

Bollinger Squeeze - The Bollinger Bands Squeeze - How to Trade Bollinger Bands Squeeze

The Bollinger Bulge

The widening of Bollinger Bands is a sign of a price breakout and is known as the Bollinger Band Bulge.

Bollinger Bands that are far apart can serve as a signal that a trend reversal is approaching. In the Bollinger bands indicator example explained and illustrated below, the trading Bollinger bands get very wide as a result of high price volatility on the down swing. The trend reverses as prices reach an extreme level according to statistics & the theory of normal distribution. The "bulge" predicts the change to a downward trend.

Bollinger Bulge - The Bollinger Bulge - How to Trade Bollinger Band Bulge