What it is
John Bollinger added bandwidth to put the squeeze into a single number. When the bands pinch together, bandwidth falls; when they open, it rises.
The most useful reading is relative: a bandwidth at its lowest in several months on that market and timeframe is a squeeze. The absolute number differs from market to market.
How it is calculated
Middle band = 20 period simple moving average of the close. Upper and lower bands = middle band plus or minus 2 standard deviations of the last 20 closes. Bandwidth = (upper band minus lower band) / middle band x 100, which equals 4 x the standard deviation / the middle band x 100.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| length | 20 | 2 to 400 | How many closes the bands are built from. The band width multiplier is fixed at 2 standard deviations. |
How to read it
How to trade it
- 1
On a 1 hour gold chart, look for bandwidth at its lowest level of the last 100 or more candles.
- 2
Entry trigger: the first close outside the Bollinger Bands while bandwidth turns up. Trade in the direction of that close.
- 3
Stop at the middle band, often 8 to 15 points on gold 1 hour during a squeeze.
- 4
Target 2 to 3 times the stop. Consider exits when bandwidth peaks and turns down.
A close back inside the bands within two or three candles, with bandwidth falling again, cancels the breakout.
On WickSpeak, Bollinger bandwidth writes a plain-English reading on the live candle: whether the bands are squeezed or wide compared with normal, how to trade that and what would prove it wrong. In Playbook you can test: is above or below its own average, is rising, or is falling. A squeeze play can combine "bandwidth is below its own average" with "price closes above the upper band".
Best markets and timeframes
Useful on gold, US30, NAS100 and forex on 15 minute to daily charts. Squeezes on higher timeframes tend to lead to longer moves.
Common mistakes
- Guessing the breakout direction before price closes outside the bands.
- Comparing bandwidth numbers across different markets.
- Missing the head fake: a first break in one direction that reverses into the real move.
Works well with
Questions traders ask
What is a Bollinger squeeze?
A period when Bollinger bandwidth is at a long time low, meaning prices have been unusually calm. A bigger move often follows, but the squeeze does not tell you which way.
What is a low Bollinger bandwidth value?
There is no universal number. Compare with the same market's history: a reading at its lowest for months on that timeframe is a squeeze.
How is Bollinger bandwidth calculated?
Subtract the lower band from the upper band, divide by the middle band and multiply by 100 to get a percentage.
What is a head fake in a squeeze?
Price breaks out of a squeeze one way, then quickly reverses and breaks the other way. A stop back at the middle band limits the damage.