What is BBands?
Volatility bands placed above and below a moving average, using standard deviation to measure price volatility.
Think of it like this
Like elastic guardrails on a highway - they widen when the road gets curvy (volatile) and narrow when it's straight (calm).
Formula
Upper = SMA(20) + (2 × StdDev), Lower = SMA(20) - (2 × StdDev)- Middle Band: 20-day Simple Moving Average
- Upper Band: Middle + 2 standard deviations
- Lower Band: Middle - 2 standard deviations
- Width: (Upper - Lower) / Middle
Why it matters
- Shows dynamic support and resistance levels
- Identifies periods of high and low volatility
- Price tends to stay within bands 95% of time
- Squeeze indicates potential breakout
What's a good value?
Touch Upper
Overbought
Price at top of range
Touch Lower
Oversold
Price at bottom of range
Bands Narrowing
Low Volatility
Potential breakout coming
Bands Widening
High Volatility
Strong move in progress
Real-world example
Price touching the lower band during a squeeze may signal a buying opportunity if trend is bullish.
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