StockYanThree lines
Bollinger Bands are three lines drawn on a price chart.
Standard deviation is a measure of how far prices usually stray from their average. When prices swing a lot, it grows and the bands move apart. When prices are calm, it shrinks and the bands move closer.
- Middle band: the 20-day simple moving average.
- Upper band: the middle band plus 2 standard deviations.
- Lower band: the middle band minus 2 standard deviations.
Reading the bands
Most closes land inside the bands. A close near the upper band means the price is high compared with its recent average. A close near the lower band means it is low.
Touching a band is not a signal by itself. In a strong uptrend, the price can ride along the upper band for many days.
Walking the band
When a stock closes near the upper band day after day, traders say it is walking the band. It is a sign of strength. Reading every touch of the upper band as a top would miss many strong runs.
The squeeze
When the bands get very close together, it is called a squeeze. It means the price has been unusually calm.
Calm periods often end with a bigger move, but a squeeze does not say which way. Traders wait for a close outside a band to see the direction.
Using bands with other tools
Bollinger Bands show where price sits compared with its recent range. Other tools fill in the rest.
- Pair them with RSI to see if a move is stretched.
- Check volume when price closes outside a band.
- Use support and resistance for nearby levels.
%B and bandwidth
Two numbers sum up the bands. %B shows where the close sits: 0 is the lower band, 1 is the upper band and 0.5 is the middle.
Bandwidth is the distance between the upper and lower band as a share of the middle band. A low bandwidth means a squeeze.
Common mistakes
These are the habits that most often lead beginners astray.
- Treating every band touch as a turn.
- Ignoring the trend the bands sit in.
- Guessing which way a squeeze will break.
- Skipping the volume check.
A NEPSE example
On 27 Oct 2026, Nabil Bank (NABIL) closed at Rs 542. Its 20-day Bollinger Bands were: upper Rs 548.44, middle Rs 537.06 and lower Rs 525.68.
The close sat above the middle band and below the upper band, about 72% of the way up the channel.
The bands were about 4.2% apart, so the price had been fairly calm. They were not tight enough for StockYan to flag a squeeze. In the numbers above, %B was 0.72 and bandwidth was 4.24%.