Bollinger Band Squeeze — Trading Wiki

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What Bollinger Band Squeeze means

A Bollinger Band squeeze describes a narrow distance between the bands relative to a selected comparison period. It reflects lower measured volatility, without specifying the direction or size of the next move.

In depth

The Bollinger Band squeeze is a volatility-based trading pattern that identifies periods of abnormally low volatility — conditions in which the bands are narrow relative to the chosen lookback period. Developed by John Bollinger in the 1980s, Bollinger Bands consist of three lines: a 20-period simple moving average (middle band) and two bands set at 2 standard deviations above and below the middle band. The bands expand during periods of high volatility and contract during low volatility. A squeeze occurs when this contraction reaches extreme levels — specifically when the Bandwidth indicator (the percentage difference between upper and lower bands) drops to its lowest value over a defined lookback period, typically 6 months or 125 trading sessions.

A later expansion in volatility is possible, but a squeeze does not require a large move or establish when one will occur. The squeeze alone does not determine breakout direction; additional indicators do not remove that uncertainty. The Bollinger Band squeeze is often combined with the Keltner Channel — another volatility indicator that uses Average True Range (ATR) instead of standard deviations. When the Bollinger Bands contract inside the Keltner Channel, it confirms the squeeze condition and is known as the 'TTM Squeeze' (created by John Carter).

These indicators use related historical data; combining them does not establish a measured reduction in false signals. Volume analysis is crucial during and after the squeeze. Record volume relative to a stated historical window, including breaks that reverse and those that continue. No volume multiple or initial candle establishes a validated probability or duration of continuation.

Key points

• Narrow bands describe lower recent volatility; they do not establish when a breakout will occur
• A break outside a band is an observation that can continue or reverse
• Volume provides another observation, without validating a future move

Why it matters when you are learning

The Bollinger squeeze is like a coiled spring — tight bands mean energy is building. Learning to spot squeezes helps you catch big moves early.

Practising Bollinger Band Squeeze on the simulator

Use the simulator as an observation exercise for Bollinger Band Squeeze. The main feature to identify is: Narrow bands describe lower recent volatility; they do not establish when a breakout will occur. A second feature to compare is: A break outside a band is an observation that can continue or reverse. A third feature to note is: Volume provides another observation, without validating a future move. The presence of the concept is not a prediction or a trade signal. Educational simulation only — not financial advice.