1
Dynamic envelope
The middle band is a moving average; the outer bands are placed a selected number of standard deviations above and below it.
Lesson · Technical Indicators
Bollinger Bands
Build a moving-average envelope from standard deviation, inspect band width and %B, identify volatility contraction and expansion, and avoid treating a band touch as a complete signal.
Synthetic educational data
Core concepts
Understand what the indicator calculates, how its parameters affect it, and what it cannot establish by itself.
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Band width
The distance between the bands expands and contracts with recent dispersion around the average.
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%B
%B expresses the close relative to the lower and upper bands. Values can exceed 100 or fall below 0 when price closes outside the envelope.
Interactive lesson
Change the inputs, inspect the calculation, and compare the indicator with the underlying price data.
Price with bandsBasis and standard-deviation envelope
Band width20 periods · 2.0 standard deviations
Interpret Bollinger Bands
Separate volatility, relative position, and price behavior at the envelope.
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Calculate the basis
Use a documented moving-average period and source.
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Calculate dispersion
Compute the rolling standard deviation over the same window: the square root of the average squared distance of each close from the basis.
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Place the bands
Add and subtract the selected multiple of standard deviation.
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Choose the observation
State whether the rule uses width, %B, a close outside, re-entry, or another exact condition.
Bands, width, and %B
Score 0 / 0Choose the best answer.
Lesson rule
A band touch describes price relative to a volatility envelope. It is not automatically support, resistance, overbought, oversold, or a reversal.
Common mistakes
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Selling every upper-band touchA strong trend can repeatedly move along or outside an expanding upper band.
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Assuming a squeeze predicts directionContraction describes low recent dispersion; breakout direction requires separate evidence.
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Changing multiplier to fit one chartA wider or narrower envelope changes event frequency and must be selected before evaluation.
Completion standard
✓
Finish when you can explain width and %B as separate outputs.
Calculate the basis and bands, identify the current band width percentile, compute %B, and state the exact price event required by your rule.
Calculation note: This lesson uses a simple moving average and population standard deviation over the same period. Some platforms offer different basis types, sources, or standard-deviation conventions.