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%.
- BandWidth=(202−198)/200×100=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.
Show the answer and explanation
8%
(52−48)/50×100=8%.
Volatility and transformed data
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Related terms
Sources and documentation
- John Bollinger – band rules
Band touches, historical dispersion and normalized BandWidth; touches alone are not orders.
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