{"id":2191,"date":"2026-09-23T08:07:22","date_gmt":"2026-09-23T08:07:22","guid":{"rendered":"https:\/\/entri.app\/explore\/?post_type=curriculum&#038;p=2191"},"modified":"2026-09-24T05:37:53","modified_gmt":"2026-09-24T05:37:53","slug":"bollinger-bands","status":"publish","type":"curriculum","link":"https:\/\/entri.app\/explore\/stock-market\/bollinger-bands\/","title":{"rendered":"Bollinger Bands"},"content":{"rendered":"<p>Bollinger Bands is a popular technical analysis tool used by traders to check price volatility. It also helps in identifying potential buying or selling opportunities in stocks, indices, or currencies.<\/p>\n<p>When it comes to Indian investors tracking stocks on the NSE or BSE, this tool can help make sense of price swings during volatile market phases. Some relatable examples of such scenarios are budget announcements or quarterly results season.<\/p>\n<h2><strong>What are they?<\/strong><\/h2>\n<p>This indicator consists of three lines plotted on a price chart:<\/p>\n<ul>\n<li><strong>Middle Band<\/strong> \u2013 A simple moving average (usually 20-day)<\/li>\n<li><strong>Upper Band<\/strong> \u2013 Middle band + (2 x standard deviation)<\/li>\n<li><strong>Lower Band<\/strong> \u2013 Middle band \u2212 (2 x standard deviation)<\/li>\n<\/ul>\n<p>Together, these three lines form a &#8220;band&#8221; that expands and contracts based on how volatile the price is. When the market is calm, the band narrows. When the market is choppy, the band widens.<\/p>\n<h2><strong>How are they Calculated?<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Component<\/strong><\/td>\n<td><strong>Formula<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Middle Band<\/td>\n<td>20-day Simple Moving Average (SMA)<\/td>\n<\/tr>\n<tr>\n<td>Upper Band<\/td>\n<td>Middle Band + (2 \u00d7 Standard Deviation)<\/td>\n<\/tr>\n<tr>\n<td>Lower Band<\/td>\n<td>Middle Band \u2212 (2 \u00d7 Standard Deviation)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The &#8220;20&#8221; and &#8220;2&#8221; are default settings, but traders can adjust them based on their strategy and the stock&#8217;s typical behaviour.<\/p>\n<h2><strong>What do they Tell You?<\/strong><\/h2>\n<ul>\n<li><strong>Band Width<\/strong>: A narrow band indicates low volatility, often followed by a sharp move. A wide band is a sign of high volatility, often followed by consolidation.<\/li>\n<li><strong>Price Near Upper Band<\/strong>: The stock may be relatively expensive or &#8220;overbought.&#8221;<\/li>\n<li><strong>Price Near Lower Band<\/strong>: The stock may be relatively cheap or &#8220;oversold.&#8221;<\/li>\n<li><strong>Price Touching Bands<\/strong>: This does not automatically mean &#8220;buy&#8221; or &#8220;sell&#8221;. It simply flags an extreme move that needs further confirmation.<\/li>\n<\/ul>\n<h2><strong>3 Common Strategies that Traders Use<\/strong><\/h2>\n<h3><strong>1. The Squeeze<\/strong><\/h3>\n<p>When the bands come very close together, it usually signals low volatility. Traders watch for this &#8220;squeeze&#8221; because it often precedes a big price move, up or down.<\/p>\n<h3><strong>2. Band Walk<\/strong><\/h3>\n<p>In a strong trend, the price may repeatedly touch or &#8220;walk&#8221; along the upper or lower band. This shows trend strength rather than a reversal.<\/p>\n<h3><strong>3. Double Bottom \/ Double Top<\/strong><\/h3>\n<p>If the price dips below the lower line, bounces back, and then makes a second low above the band, it may indicate a reversal (double bottom). A mirror pattern at the top may indicate a downside reversal (double top).<\/p>\n<h2><strong>Simple Example<\/strong><\/h2>\n<p>Suppose a stock is trading at \u20b9500 with a 20-day average of \u20b9480. If the standard deviation is \u20b910:<\/p>\n<ul>\n<li>Upper Band = 480 + (2 \u00d7 10) = \u20b9500<\/li>\n<li>Lower Band = 480 \u2212 (2 \u00d7 10) = \u20b9460<\/li>\n<\/ul>\n<p>Since the price (\u20b9500) is touching the upper line here, a trader might treat this as a caution zone rather than a straightforward buy signal, and look for other confirming indicators like volume or RSI.<\/p>\n<h2><strong>Points to Remember for Indian Traders<\/strong><\/h2>\n<ul>\n<li>Works well on liquid stocks and indices like Nifty 50 or Sensex constituents, where price data is smooth and reliable.<\/li>\n<li>During results season or major news events (Budget, RBI policy), bands can widen sharply \u2014 be cautious of false signals.<\/li>\n<li>Best used along with other tools such as RSI, MACD, or volume analysis, rather than alone.<\/li>\n<li>Not a guarantee of future price direction; it only measures volatility and relative price levels.<\/li>\n<\/ul>\n<h2><strong>Advantages and Limitations<\/strong><\/h2>\n<table>\n<tbody>\n<tr>\n<td><strong>Advantages<\/strong><\/td>\n<td><strong>Limitations<\/strong><\/td>\n<\/tr>\n<tr>\n<td>Easy to understand visually<\/td>\n<td>Can give false signals in sideways markets<\/td>\n<\/tr>\n<tr>\n<td>Adapts automatically to volatility<\/td>\n<td>Lagging, since it&#8217;s based on moving averages<\/td>\n<\/tr>\n<tr>\n<td>Useful for spotting overbought\/oversold zones<\/td>\n<td>Not effective alone; needs confirmation<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><strong>Conclusion<\/strong><\/h2>\n<p>This indicator is a simple, at the same time powerful way to gauge market volatility. It also helps identify potential entry or exit zones. It&#8217;s a good starting point for all beginners in the Indian stock market. However, like any technical tool, it works best when combined with sound risk management and other confirming indicators, rather than used in isolation.<\/p>\n<table>\n<tbody>\n<tr>\n<td colspan=\"2\">\n<p style=\"text-align: center;\"><b>Also Read<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/exponential-moving-average-ema\/\" target=\"_blank\" rel=\"noopener\"><b>Exponential Moving Average (EMA)<\/b><\/a><b>\u00a0<\/b><\/td>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/pivot-points-trading\/\" target=\"_blank\" rel=\"noopener\"><b>Pivot Points Trading<\/b><\/a><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/candlestick-chart-basics\/\" target=\"_blank\" rel=\"noopener\"><b>Candlestick Chart Basics<\/b><\/a><\/p>\n<\/td>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/how-to-buy-and-sell-shares\/\" target=\"_blank\" rel=\"noopener\"><b>How to Buy and Sell Shares\u00a0<\/b><\/a><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/fibonacci-retracement-strategy\/\" target=\"_blank\" rel=\"noopener\"><b>Fibonacci Retracement Strategy<\/b><\/a><b>\u00a0<\/b><\/td>\n<td>\n<p style=\"text-align: center;\"><a href=\"https:\/\/entri.app\/explore\/stock-market\/trendline-trading-strategy\/\" target=\"_blank\" rel=\"noopener\"><b>Trendline Trading Strategy\u00a0<\/b><\/a><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>Bollinger Bands is a popular technical analysis tool used by traders to check price volatility. It also helps in identifying potential buying or selling opportunities in stocks, indices, or currencies. When it comes to Indian investors tracking stocks on the NSE or BSE, this tool can help make sense of price swings during volatile market [&hellip;]<\/p>\n","protected":false},"author":14,"featured_media":0,"template":"","meta":{"_acf_changed":false},"curriculum-category":[111,112,143],"custom_linking_tags":[],"class_list":["post-2191","curriculum","type-curriculum","status-publish","hentry","curriculum-category-stock-market","curriculum-category-stock-market-tutorials","curriculum-category-swing-trading"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bollinger Bands - Entri Free Materials<\/title>\n<meta name=\"description\" content=\"Wondering what Bollinger Bands are? 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