What are Bollinger Bands?
Created by John Bollinger in the 1980s, they are a volatility indicator made up of three lines: a simple moving average (SMA) in the centre and two bands at ±2 standard deviations. When the bands widen there is high volatility; when they contract (a squeeze) there is low volatility and a strong move is expected.
Recommended settings
Standard setting: SMA(20) with 2 deviations. For short-term binary options, some traders use SMA(10) with 1.5 deviations for more sensitive signals.
Band bounce: when price touches the upper band it may reverse (PUT). When it touches the lower band it may reverse (CALL). Confirm with the RSI or a candle pattern.
Squeeze and breakout: when the bands contract sharply, prepare for an explosive move. Trade in the direction of the breakout.
Walking the bands: in a strong trend, price "walks" along the band. Don’t trade against the trend.
💡 Tip
Bollinger Bands work best in ranging markets. In strong trends, price can hug one band for a long time. Always combine them with other indicators such as the RSI.