What are Bollinger Bands?
Bollinger Bands consist of three lines: a middle band (20-period SMA), an upper band (middle + 2 standard deviations), and a lower band (middle - 2 standard deviations).
Created by John Bollinger, they dynamically expand and contract based on market volatility.
The Squeeze
When bands narrow (low volatility), a squeeze is forming. This often precedes a big move — but doesn't tell you the direction. Breakout Bob watches for squeezes as setup signals.
Band Walks
In strong trends, price "walks" along the upper or lower band. This isn't a reversal signal — it confirms trend strength.
🤖 How Our AI Uses This
Mean Revert Mary's core strategy: when price touches the lower Bollinger Band with RSI < 35, she considers it a high-probability buy signal. Breakout Bob watches for band squeezes followed by expansion as breakout confirmation.
Key Takeaways
- Bands expand in high volatility, contract in low volatility
- Price touching a band isn't an automatic signal
- Squeezes precede big moves
- Combine with RSI for higher-probability setups