Bollinger Bands are a volatility indicator, created by John Bollinger, consisting of a middle simple moving average (commonly 20-period) with an upper and lower band placed a set number of standard deviations away — usually two. Because the bands are built from standard deviation, they widen when volatility rises and narrow when it falls, framing price in adaptive terms.
They are read two ways that seem contradictory but are context-dependent. In a range, touches of the outer bands are mean-reversion cues back toward the middle. In a trend, price “walking the band” shows strong momentum, not an automatic reversal. The famous squeeze — bands contracting to an unusually narrow width — flags low volatility that often precedes a sharp expansion, which is the tradable event.
Bollinger Bands are a primitive in Secuora’s AI backtester. A Bollinger-squeeze breakout baseline on BTC in Secuora’s research at /strategy lost money over twelve months after costs — the squeeze reliably marks compression, but the direction of the expansion is the part it cannot promise.
A 20-period SMA is $100 with a standard deviation of $2 and k = 2: upper band = 100 + (2 × 2) = $104, lower band = 100 − (2 × 2) = $96.