Technical analysis
What do the upper and lower bands of Bollinger Bands tell us about volatility?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Bollinger Bands plot a moving average with upper and lower bands set at standard deviations from it; widening bands signal rising volatility, while narrowing bands (a 'squeeze') suggest low volatility that often precedes a breakout.
How it works
Price touching the upper band doesn't automatically mean overbought, nor the lower band oversold—bands expand and contract dynamically with volatility, so they're best read in context of overall trend direction.
An example
A tightening Bollinger Band squeeze before earnings often precedes a sharp directional move once the news catalyst hits.
Risk & limitations
Chasing a band touch as an automatic reversal signal during a strong trend can lead to premature, losing counter-trend trades.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.