Forex glossary

Bollinger Band Squeeze

A Bollinger squeeze means relatively narrow bands, often identified through low BandWidth compared with its own history. It describes reduced price dispersion in the chosen window. It may flag a condition for monitoring later volatility expansion, without determining breakout direction, timing, inevitability or a universal success rate.

Illustrative example

How does it work in practice?

Assume an average of 100 with bands at 99 and 101. BandWidth is 2% using width divided by the average; a previous 6% reading shows contraction without determining the next move's direction.

A case to work through

Narrower relative to price

Hypothetically, bands are 198 and 202, the average is 200 and earlier BandWidth was 5%.

  1. BandWidth=(202−198)/200×100=2%.
  2. The fall from 5% to 2% describes contraction under this formula without selecting a breakout side.

What follows? Set a history-based threshold and a separate direction rule.

Example boundary: Low readings can persist; the selected threshold is not universal.

A useful distinction

Bollinger Band Squeeze / Breakout

Squeeze describes relatively narrow bands; breakout requires price to cross a defined boundary.

Check your understanding

Calculate relative width without inferring direction.

Bands are 48 and 52 with average=50. What is BandWidth?

Show the answer and explanation

8%

(52−48)/50×100=8%.

Volatility and transformed data

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Sources and documentation

  • John Bollinger – band rules

    Band touches, historical dispersion and normalized BandWidth; touches alone are not orders.

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