65-Day Academy · Day 25 · Technical Analysis
What the Bands Measure
The construction
Middle band = 20-SMA. Upper/lower bands = middle ± 2 standard deviations of price over the same window. Statistically ~95% of closes land inside the bands WHEN volatility is stable. The bands are not support/resistance — they are a VOLATILITY gauge drawn around price: wide bands = volatile regime; narrow = quiet regime.
Walking the band
In strong trends price "walks the band": repeatedly touching/riding the upper band without mean-reverting. That is not "overbought" — it is trend strength expressed through volatility structure. The mean-reversion read (fade the upper band) works in RANGES and fails catastrophically in trends. Same regime-first rule as every oscillator.
%B and bandwidth
%B locates price within the bands (1.0 = at the upper band). BandWidth measures the gap itself. Professionals track BandWidth over time, not price vs bands — the squeeze (below) is where the real information lives.
What you'll practise
True or false: price touching the upper Bollinger Band is a reliable sell signal.
10 XP in the app · introductory
Sources
- Bollinger BandsInvestopedia
- Bollinger on Bollinger BandsJohn Bollinger
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All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.