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Bollinger Bands
Volatility envelope: a 20-period SMA flanked by two bands at ±2 standard deviations.
What it is
Bollinger Bands, designed by John Bollinger in the 1980s, wrap a moving-average line in two volatility bands. Default settings: 20-period SMA, bands at ±2 standard deviations. When the bands squeeze tight, volatility is low and a breakout is statistically near. When price touches the upper band it's stretched but not necessarily a sell — in strong trends, price 'walks the band'. The most actionable signal is a band squeeze followed by an expansion candle that closes outside the bands, often launching a 5–15% directional move.
Example
SOL spends 48 hours grinding sideways between $84 and $86. Bollinger Bands compress to within $2 of each other (a clear squeeze). On the next 4h candle, SOL closes at $88.50, decisively above the upper band. Within 12 hours it's at $94.
How Indikora uses Bollinger Bands
Indikora's Regime agent uses Bollinger Band width to classify market state — 'compressed' bands switch the strategy to breakout-hunter mode.
Related terms
- Volatility — The magnitude of price swings over time — high volatility means bigger and faster moves.
- ATR (Average True Range) — Wilder's 14-period average of true ranges — a pure measure of how volatile an asset has been.
- Breakout — A decisive close beyond a key support, resistance, or consolidation pattern — usually with volume confirmation.