Bollinger Bands

What is it?

Bollinger Bands consist of a middle band (20-SMA) and upper/lower bands at 2 standard deviations. When bands narrow (squeeze), a big move is coming. Price touching the lower band in an uptrend = buying opportunity. Price at the upper band = potential over-extension. The band width measures current volatility vs. historical.

Why it matters

Bollinger Bands (weight 1.0) are a SECONDARY indicator in AIShare. They excel at spotting volatility squeezes (bands narrowing < 4% width → big move pending) and boundary touches that signal oversold/overbought conditions.

Formula

Upper = SMA(20) + 2σ; Lower = SMA(20) − 2σ; Middle = SMA(20)

Key parameters

How to use

1. 1Price at/below lower band = Potentially oversold — look for bounce
2. 2Price at/above upper band = Potentially overbought — look for pullback
3. 3Band squeeze (width < 4%) = Low volatility → big move coming soon
4. 4Upper band ride = Strong uptrend — don't short, let it ride
5. 5Price crossing middle band (20-SMA) = Trend direction change
6. 6W-bottom pattern at lower band = Strong reversal signal

Signals (5)

Swing trading tips

• Buy when price touches lower band + RSI < 35 in an uptrend
• Take profits when price reaches upper band from lower band
• Bollinger squeeze + volume breakout = explosive move — trade the direction
• Don't blindly buy at lower band in a downtrend — it's not support

Common mistakes to avoid

• Treating band touches as automatic buy/sell signals without trend context
• Ignoring the squeeze — it's the most valuable Bollinger setup
• Not using volume to confirm band breakouts

Video tutorials (3)

• Bollinger Bands Trading Strategy

  Trading Rush

• Bollinger Bands Squeeze — Best Setup

  Rayner Teo

• How to Use Bollinger Bands (Complete Guide)

  The Trading Channel

Third-party tutorials — linked for educational reference. AIShare is not affiliated with these creators.

Quick quiz — test your BB knowledge

5 questions. Pass with 3 out of 5 for a completion badge.

1. 1Bollinger Bands are plotted at…

   AFixed ±5% from priceB±1 ATR from priceC±2 standard deviations from a 20-period SMADAbove and below the VWAP

2. 2A 'Bollinger squeeze' is…

   ABands widening dramaticallyBBands narrowing — low volatilityCBands invertingDA charting glitch

3. 3Price touching the lower band is most reliable as a bounce signal when…

   AThe broader trend is bearishBATR is zeroCThe broader trend is bullishDVolume is zero

4. 4'Riding the upper band' usually means…

   AA weak, fake rallyBA strong uptrend — don't short it blindlyCA programme-errorDA squeeze

5. 5Best practice around a squeeze breakout is…

   ATrade the first tick regardless of volumeBWait for a direction AND above-average volumeCAssume it will always go upDIgnore it

Educational self-assessment only — not a regulated qualification.