Bollinger Bands & the Squeeze: Trading the Calm Before the Storm

Bollinger Bands are three lines: a 20-day average in the middle, and two bands drawn a couple of standard deviations above and below. Translation: the bands hug price loosely when markets are calm and stretch wide when they're wild — they breathe with volatility.

What the bands tell you

• Price riding the upper band — a strong, persistent rally. (Not automatically "overbought" — strong trends walk the band for weeks.)
• Price at the lower band after a slide — stretched to the downside; bounces often begin near here, though "often" is not "always."
• Band width — the real information. Wide = turbulent. Narrow = eerily quiet.

The Squeeze: volatility's rubber band

Markets alternate between quiet coiling and explosive movement. When the bands contract to their tightest in months, a stock is coiling — buyers and sellers in tense equilibrium, position sizes building on both sides. The eventual break, either direction, tends to travel far, because one whole side is forced to unwind.

Our Bollinger Squeeze scanner hunts exactly this: bands at their narrowest in ~6 months, then a close above the upper band as the resolution begins — with the stop at the middle band, where the breakout thesis dies.

The mistake to avoid

Touching a band is not a signal. "Price hit the upper band, so sell" loses money in every strong trend in history. The bands describe *conditions* — calm or storm, stretched or coiled. Combine the squeeze with volume confirmation and the broader trend, the way the scanner does, and you're trading the storm's arrival rather than guessing at weather.