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| Meta Title | Bollinger Bands: What They Are and How to Use Them | Charles Schwab |
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| Boilerpipe Text | Flexible and visually intuitive to many traders, Bollinger Bands
®
can be a helpful
technical analysis
tool. Invented in 1983 by John Bollinger, they're designed to help traders evaluate price action and a stock's volatility.
Before we get to how they can do that, let's talk about what they are and what they look like. A Bollinger Band consists of a middle band (which is a
moving average
) and an upper and lower band. These upper and lower bands are set above and below the moving average by a certain number of standard deviations of price. The general principle is that by comparing a stock's position relative to the bands, a trader may be able to determine if a stock's price is relatively low or relatively high. Furthermore, the width of the band can be an indicator of a stock's volatility (narrower bands indicate less volatility while wider ones indicate higher volatility).
Bollinger Bands typically use a 20-period moving average, where the "period" could be 5 minutes, an hour, or a day. By default, the upper and lower bands are set two standard deviations above and below the moving average. However, traders can customize the number of periods in the moving average as well as the number of deviations.
Figure 1: Bollinger Band activity over the course of 20 days.
For illustrative purposes only
Using Bollinger Bands
Before we discuss how to use Bollinger Bands, it's important to note: When the price touches the upper band, it doesn't necessarily mean that you should sell. Similarly, when the price touches the lower band, it doesn't necessarily mean you should buy. In fact, take it from John Bollinger himself who said, "There is absolutely nothing about a tag of a band that in and of itself is a signal. "
1
Prices can "walk the band" during a strong down- or uptrend. This means that there are repeated instances of a price touching or breaking through the lower or upper band. That's why you may not want to take action when the price touches either band—you may, instead, prefer to wait and look for chart patterns like the "double bottom," a "classic M top," or a "three pushes to high" formation. Let's talk about these chart patterns in more detail:
Dive deeper into your trading strategy.
Double bottom
A double bottom occurs when there is a fall in price, followed by a rise, followed by another fall that is close to the previous low, and finally another rise.
To identify a double bottom, look for a price that has touched the lower band and wait to see where the next low occurs. A price that reacts and rises close to the middle band, followed by a second low inside the lower band, suggests that the price is positioned for an upward move.
Without the Bollinger Band, the stock could look like it is trending down on the second low, especially if the second low is lower than the first. But with the Bollinger Band, the second low may indicate that the stock could be preparing for an uptrend.
Figure 2: The double bottom on display.
For illustrative purposes only
The classic M top
The classic M top is formed by a push to a high, followed by sell-off reaction, and then a test of the previous high. The second high can be higher or lower than the first high. Watching the price behave like this, a trader may wonder if the stock is in a new uptrend, or if it has met its resistance. The Bollinger Band may help to answer this.
In a classic M top, the first high either touches or is outside of the upper band, the price reacts by dropping close to the middle band (the moving average), and the second high touches inside the upper band. The second high can be higher or lower than the first high. The fact that the second high is within the upper band suggests that it is a lower high on a relative basis. For many traders, this second high may signal a sell.
Figure 3: This classic M top shows how a second high can be both higher than the first, yet still within the upper band.
For illustrative purposes only
Three pushes to high
A "three pushes to high" top often develops as a leading edge of a larger, longer topping formation. The way it forms is typically like this: The first push creates a new high outside the upper band; the second push makes a new high and touches, or even briefly breaks through, the upper band; the third push makes a new high, but within the upper band.
This scenario can be an indicator of decreasing momentum. With it, you may notice there is also decreasing volume.
Figure 4: With the first high above the upper band, the second high at it, and the third high beneath the upper band, the "three pushes to high" formation is complete.
For illustrative purposes onlyÂ
Signaling the starts or the ends of trends
Bollinger Bands can also indicate the end of a strong trend. Strong trends, especially those developing after a breakout of a trading range, will result in an expansion in volatility that will cause the bands to initially move apart. This means that in a strong uptrend, the lower band will actually move downward in the opposite direction of the new trend. When the lower band turns back up, it can be a signal that the move higher might be over, at least for a while.
Another interesting use of Bollinger Bands is based on the observation that volatility tends to be mean reverting: Periods of low volatility are generally followed by high volatility and vice versa.
Narrow bands indicate a squeeze, which means that volatility is low. But remember, since volatility is mean reverting, the bands will probably expand, signaling a potential for an explosive move. A simple way to spot a squeeze is to identify when the bands are the narrowest they have been for the last six months. You can gauge this visually or, as in the example below, you can use something like a study in the thinkorswim platform to express the distance between the upper and lower bands. Here we are using the BollingerBandwidth study, which can be found in the Studies Library.
Figure 5: The Bollinger Band shows a squeeze, which could signal more volatility ahead.
For illustrative purposes onlyÂ
If you're looking to go long when trading a squeeze, one approach that traders employ is placing a buy entry point above the upper band. Once it's executed, traders might then place an initial stop under the low of the breakout formation or under the lower band. If you're thinking about shorting, another strategy that traders use is to place a short sell entry point below the lower band in the squeeze area and, once it's executed, some traders may choose to place the initial stop over the high of the breakout formation or over the upper band. Remember to adjust stop orders as needed, or consider using a
trailing stop
designated in either a fixed dollar amount or a fixed percentage. Another method is to use the parabolic SAR indicator to trail a stop. Finally, to capture longer moves, some traders might consider exiting when the stock tags the opposite band (i.e., the lower band if they are long, or the upper band if they are short). Please remember, there is no guarantee that execution of a stop order will be at or near the stop price.
Pair with other indicators
Since Bollinger Bands are a pure price indicator, you might want to consider combining them with volume indicators for even more depth and insight. Ultimately, there's no indicator that guarantees you'll always get in at the bottom or out at the top. However, Bollinger Bands—especially when paired with other indicators such as chart pattern recognition tools—can help you make better trading decisions. Lastly, technical analysis is not recommended as a sole means of investment research. Many factors can influence the movement of a stock, and technical analysis, with its focus on historical data, does not guarantee successful trades.
1
Bollinger, John,
Bollinger on Bollinger Bands®
(McGraw-Hill, 2001), 112.
Dive deeper into your trading strategy.
More from Charles Schwab
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Â
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Investing involves risk, including loss of principal.
Short selling is an advanced trading strategy involving potentially unlimited risks and must be done in a margin account. Margin trading increases your level of market risk. For more information, please refer to your account agreement and the
Margin Risk Disclosure Statement
.
Past performance is no guarantee of future results.
0425-A5SL |
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[Technical Analysis](https://www.schwab.com/learn/topic/technical-analysis)
# Bollinger Bands: What They Are and How to Use Them
Bollinger Bands® help you identify sharp, short-term price movements and potential entry and exit points.
April 15, 2025•[Kevin Horner](https://www.schwab.com/learn/author/kevin-horner)
***
Flexible and visually intuitive to many traders, Bollinger Bands® can be a helpful [technical analysis](https://www.schwab.com/learn/story/filtering-market-using-technical-analysis) tool. Invented in 1983 by John Bollinger, they're designed to help traders evaluate price action and a stock's volatility.
Before we get to how they can do that, let's talk about what they are and what they look like. A Bollinger Band consists of a middle band (which is a [moving average](https://www.schwab.com/learn/story/simple-vs-exponential-moving-averages)) and an upper and lower band. These upper and lower bands are set above and below the moving average by a certain number of standard deviations of price. The general principle is that by comparing a stock's position relative to the bands, a trader may be able to determine if a stock's price is relatively low or relatively high. Furthermore, the width of the band can be an indicator of a stock's volatility (narrower bands indicate less volatility while wider ones indicate higher volatility).
Bollinger Bands typically use a 20-period moving average, where the "period" could be 5 minutes, an hour, or a day. By default, the upper and lower bands are set two standard deviations above and below the moving average. However, traders can customize the number of periods in the moving average as well as the number of deviations.
Figure 1: Bollinger Band activity over the course of 20 days.
For illustrative purposes only
## Using Bollinger Bands
Before we discuss how to use Bollinger Bands, it's important to note: When the price touches the upper band, it doesn't necessarily mean that you should sell. Similarly, when the price touches the lower band, it doesn't necessarily mean you should buy. In fact, take it from John Bollinger himself who said, "There is absolutely nothing about a tag of a band that in and of itself is a signal. "1
Prices can "walk the band" during a strong down- or uptrend. This means that there are repeated instances of a price touching or breaking through the lower or upper band. That's why you may not want to take action when the price touches either band—you may, instead, prefer to wait and look for chart patterns like the "double bottom," a "classic M top," or a "three pushes to high" formation. Let's talk about these chart patterns in more detail:
***
## Dive deeper into your trading strategy.
[Explore thinkorswim®](https://www.schwab.com/trading/thinkorswim)
***
### Double bottom
A double bottom occurs when there is a fall in price, followed by a rise, followed by another fall that is close to the previous low, and finally another rise.
To identify a double bottom, look for a price that has touched the lower band and wait to see where the next low occurs. A price that reacts and rises close to the middle band, followed by a second low inside the lower band, suggests that the price is positioned for an upward move.
Without the Bollinger Band, the stock could look like it is trending down on the second low, especially if the second low is lower than the first. But with the Bollinger Band, the second low may indicate that the stock could be preparing for an uptrend.
Figure 2: The double bottom on display.
For illustrative purposes only
### The classic M top
The classic M top is formed by a push to a high, followed by sell-off reaction, and then a test of the previous high. The second high can be higher or lower than the first high. Watching the price behave like this, a trader may wonder if the stock is in a new uptrend, or if it has met its resistance. The Bollinger Band may help to answer this.
In a classic M top, the first high either touches or is outside of the upper band, the price reacts by dropping close to the middle band (the moving average), and the second high touches inside the upper band. The second high can be higher or lower than the first high. The fact that the second high is within the upper band suggests that it is a lower high on a relative basis. For many traders, this second high may signal a sell.
Figure 3: This classic M top shows how a second high can be both higher than the first, yet still within the upper band.
For illustrative purposes only
### Three pushes to high
A "three pushes to high" top often develops as a leading edge of a larger, longer topping formation. The way it forms is typically like this: The first push creates a new high outside the upper band; the second push makes a new high and touches, or even briefly breaks through, the upper band; the third push makes a new high, but within the upper band.
This scenario can be an indicator of decreasing momentum. With it, you may notice there is also decreasing volume.
Figure 4: With the first high above the upper band, the second high at it, and the third high beneath the upper band, the "three pushes to high" formation is complete.
For illustrative purposes only
### Signaling the starts or the ends of trends
Bollinger Bands can also indicate the end of a strong trend. Strong trends, especially those developing after a breakout of a trading range, will result in an expansion in volatility that will cause the bands to initially move apart. This means that in a strong uptrend, the lower band will actually move downward in the opposite direction of the new trend. When the lower band turns back up, it can be a signal that the move higher might be over, at least for a while.
Another interesting use of Bollinger Bands is based on the observation that volatility tends to be mean reverting: Periods of low volatility are generally followed by high volatility and vice versa.
Narrow bands indicate a squeeze, which means that volatility is low. But remember, since volatility is mean reverting, the bands will probably expand, signaling a potential for an explosive move. A simple way to spot a squeeze is to identify when the bands are the narrowest they have been for the last six months. You can gauge this visually or, as in the example below, you can use something like a study in the thinkorswim platform to express the distance between the upper and lower bands. Here we are using the BollingerBandwidth study, which can be found in the Studies Library.
Figure 5: The Bollinger Band shows a squeeze, which could signal more volatility ahead.
For illustrative purposes only
If you're looking to go long when trading a squeeze, one approach that traders employ is placing a buy entry point above the upper band. Once it's executed, traders might then place an initial stop under the low of the breakout formation or under the lower band. If you're thinking about shorting, another strategy that traders use is to place a short sell entry point below the lower band in the squeeze area and, once it's executed, some traders may choose to place the initial stop over the high of the breakout formation or over the upper band. Remember to adjust stop orders as needed, or consider using a [trailing stop](https://www.schwab.com/learn/story/trailing-stop-orders-mastering-order-types) designated in either a fixed dollar amount or a fixed percentage. Another method is to use the parabolic SAR indicator to trail a stop. Finally, to capture longer moves, some traders might consider exiting when the stock tags the opposite band (i.e., the lower band if they are long, or the upper band if they are short). Please remember, there is no guarantee that execution of a stop order will be at or near the stop price.
## Pair with other indicators
Since Bollinger Bands are a pure price indicator, you might want to consider combining them with volume indicators for even more depth and insight. Ultimately, there's no indicator that guarantees you'll always get in at the bottom or out at the top. However, Bollinger Bands—especially when paired with other indicators such as chart pattern recognition tools—can help you make better trading decisions. Lastly, technical analysis is not recommended as a sole means of investment research. Many factors can influence the movement of a stock, and technical analysis, with its focus on historical data, does not guarantee successful trades.
1Bollinger, John, *Bollinger on Bollinger Bands®* (McGraw-Hill, 2001), 112.
***
## Dive deeper into your trading strategy.
[Explore thinkorswim®](https://www.schwab.com/trading/thinkorswim)
***
## More from Charles Schwab
[Is a Stock Rally Reversing? Article \| Mar 6, 2026](https://www.schwab.com/learn/story/ways-traders-spot-rallys-potential-end)
[Options and Implied Volatility Article \| Jan 23, 2026](https://www.schwab.com/learn/story/aligning-your-options-with-implied-volatility)
[Theta Decay in Options Trading Article \| Jan 16, 2026](https://www.schwab.com/learn/story/theta-decay-options-trading)
## Explore more topics
- [Trading](https://www.schwab.com/learn/topic/trading)
- [Technical Analysis](https://www.schwab.com/learn/topic/technical-analysis)
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Investing involves risk, including loss of principal.
Short selling is an advanced trading strategy involving potentially unlimited risks and must be done in a margin account. Margin trading increases your level of market risk. For more information, please refer to your account agreement and the [Margin Risk Disclosure Statement](https://www.schwab.com/resource/margin-disclosure-statement).
**Past performance is no guarantee of future results.**
0425-A5SL
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| Readable Markdown | Flexible and visually intuitive to many traders, Bollinger Bands® can be a helpful [technical analysis](https://www.schwab.com/learn/story/filtering-market-using-technical-analysis) tool. Invented in 1983 by John Bollinger, they're designed to help traders evaluate price action and a stock's volatility. Before we get to how they can do that, let's talk about what they are and what they look like. A Bollinger Band consists of a middle band (which is a [moving average](https://www.schwab.com/learn/story/simple-vs-exponential-moving-averages)) and an upper and lower band. These upper and lower bands are set above and below the moving average by a certain number of standard deviations of price. The general principle is that by comparing a stock's position relative to the bands, a trader may be able to determine if a stock's price is relatively low or relatively high. Furthermore, the width of the band can be an indicator of a stock's volatility (narrower bands indicate less volatility while wider ones indicate higher volatility). Bollinger Bands typically use a 20-period moving average, where the "period" could be 5 minutes, an hour, or a day. By default, the upper and lower bands are set two standard deviations above and below the moving average. However, traders can customize the number of periods in the moving average as well as the number of deviations.
Figure 1: Bollinger Band activity over the course of 20 days. For illustrative purposes only
Using Bollinger Bands
Before we discuss how to use Bollinger Bands, it's important to note: When the price touches the upper band, it doesn't necessarily mean that you should sell. Similarly, when the price touches the lower band, it doesn't necessarily mean you should buy. In fact, take it from John Bollinger himself who said, "There is absolutely nothing about a tag of a band that in and of itself is a signal. "1 Prices can "walk the band" during a strong down- or uptrend. This means that there are repeated instances of a price touching or breaking through the lower or upper band. That's why you may not want to take action when the price touches either band—you may, instead, prefer to wait and look for chart patterns like the "double bottom," a "classic M top," or a "three pushes to high" formation. Let's talk about these chart patterns in more detail:
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Double bottom
A double bottom occurs when there is a fall in price, followed by a rise, followed by another fall that is close to the previous low, and finally another rise. To identify a double bottom, look for a price that has touched the lower band and wait to see where the next low occurs. A price that reacts and rises close to the middle band, followed by a second low inside the lower band, suggests that the price is positioned for an upward move. Without the Bollinger Band, the stock could look like it is trending down on the second low, especially if the second low is lower than the first. But with the Bollinger Band, the second low may indicate that the stock could be preparing for an uptrend.
Figure 2: The double bottom on display. For illustrative purposes only
The classic M top
The classic M top is formed by a push to a high, followed by sell-off reaction, and then a test of the previous high. The second high can be higher or lower than the first high. Watching the price behave like this, a trader may wonder if the stock is in a new uptrend, or if it has met its resistance. The Bollinger Band may help to answer this. In a classic M top, the first high either touches or is outside of the upper band, the price reacts by dropping close to the middle band (the moving average), and the second high touches inside the upper band. The second high can be higher or lower than the first high. The fact that the second high is within the upper band suggests that it is a lower high on a relative basis. For many traders, this second high may signal a sell.
Figure 3: This classic M top shows how a second high can be both higher than the first, yet still within the upper band. For illustrative purposes only
Three pushes to high
A "three pushes to high" top often develops as a leading edge of a larger, longer topping formation. The way it forms is typically like this: The first push creates a new high outside the upper band; the second push makes a new high and touches, or even briefly breaks through, the upper band; the third push makes a new high, but within the upper band. This scenario can be an indicator of decreasing momentum. With it, you may notice there is also decreasing volume.
Figure 4: With the first high above the upper band, the second high at it, and the third high beneath the upper band, the "three pushes to high" formation is complete. For illustrative purposes only
Signaling the starts or the ends of trends
Bollinger Bands can also indicate the end of a strong trend. Strong trends, especially those developing after a breakout of a trading range, will result in an expansion in volatility that will cause the bands to initially move apart. This means that in a strong uptrend, the lower band will actually move downward in the opposite direction of the new trend. When the lower band turns back up, it can be a signal that the move higher might be over, at least for a while. Another interesting use of Bollinger Bands is based on the observation that volatility tends to be mean reverting: Periods of low volatility are generally followed by high volatility and vice versa. Narrow bands indicate a squeeze, which means that volatility is low. But remember, since volatility is mean reverting, the bands will probably expand, signaling a potential for an explosive move. A simple way to spot a squeeze is to identify when the bands are the narrowest they have been for the last six months. You can gauge this visually or, as in the example below, you can use something like a study in the thinkorswim platform to express the distance between the upper and lower bands. Here we are using the BollingerBandwidth study, which can be found in the Studies Library.
Figure 5: The Bollinger Band shows a squeeze, which could signal more volatility ahead. For illustrative purposes only
If you're looking to go long when trading a squeeze, one approach that traders employ is placing a buy entry point above the upper band. Once it's executed, traders might then place an initial stop under the low of the breakout formation or under the lower band. If you're thinking about shorting, another strategy that traders use is to place a short sell entry point below the lower band in the squeeze area and, once it's executed, some traders may choose to place the initial stop over the high of the breakout formation or over the upper band. Remember to adjust stop orders as needed, or consider using a [trailing stop](https://www.schwab.com/learn/story/trailing-stop-orders-mastering-order-types) designated in either a fixed dollar amount or a fixed percentage. Another method is to use the parabolic SAR indicator to trail a stop. Finally, to capture longer moves, some traders might consider exiting when the stock tags the opposite band (i.e., the lower band if they are long, or the upper band if they are short). Please remember, there is no guarantee that execution of a stop order will be at or near the stop price.
Pair with other indicators
Since Bollinger Bands are a pure price indicator, you might want to consider combining them with volume indicators for even more depth and insight. Ultimately, there's no indicator that guarantees you'll always get in at the bottom or out at the top. However, Bollinger Bands—especially when paired with other indicators such as chart pattern recognition tools—can help you make better trading decisions. Lastly, technical analysis is not recommended as a sole means of investment research. Many factors can influence the movement of a stock, and technical analysis, with its focus on historical data, does not guarantee successful trades.
1Bollinger, John, *Bollinger on Bollinger Bands®* (McGraw-Hill, 2001), 112.
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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve. Investing involves risk, including loss of principal. Short selling is an advanced trading strategy involving potentially unlimited risks and must be done in a margin account. Margin trading increases your level of market risk. For more information, please refer to your account agreement and the [Margin Risk Disclosure Statement](https://www.schwab.com/resource/margin-disclosure-statement). **Past performance is no guarantee of future results.**
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