Bollinger Bands, designed by John Bollinger in the 1980s, wrap a moving average (typically 20-period SMA) with an upper and lower band placed k standard deviations away (k = 2 is the default). The bands widen when volatility rises and contract when it falls — a 'squeeze' often precedes a directional move.
Typical reads: price touching the upper band in a strong uptrend is not by itself a sell signal — it is a sign of trend strength. Conversely, repeated touches outside the bands followed by a close back inside are sometimes used as mean-reversion triggers.
Because the bands are derived from the rolling standard deviation of price, they assume returns are approximately normal locally. In practice fat-tailed crypto returns regularly print outside the ±2σ band more often than the 5% Gaussian theory would predict.
Formula
Middle = SMA(N) Upper = Middle + k · stdev(close, N) Lower = Middle − k · stdev(close, N)
Example
20-period SMA = 100, stdev = 3, k = 2. Upper band = 106, lower band = 94. Price at 107 has briefly punched outside the band.
How Noon Barbari uses Bollinger Bands
Every concept here is implemented in the platform. Open the relevant docs or tool to see it in action.
See the indicators reference →Related terms
- Indicators
Simple moving average (SMA)
Unweighted arithmetic mean of the last N closes. Every bar counts equally.
- Statistics
Standard deviation
Square root of variance — the most common volatility measure in trading.
- Indicators
Average true range (ATR)
Rolling average of the true range — the canonical volatility measure for stops.
- Market structure
Range
Sideways price action bounded by a definable support and resistance.