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Market Intelligence › Basic Terminologies
Standard deviation as drawn on a chart, and the real meaning of a band touch
Published by The Retail Trader · JUL 23, 2026 · Indicators
Bollinger bands are two lines above and below a moving average, which sit farther apart or closer together according to the price's own volatility. They show how different today's price is from its recent normal.
The middle line is a simple moving average. The upper and lower lines are placed a few standard deviations away from that average.
When volatility rises the bands widen, and when it falls they contract. So the width of the bands is itself information.
Touching a band is not a signal:
• In a strong trend, price keeps walking along the upper band — shorting at every touch is expensive.
• A squeeze in the bands signals coming volatility, not direction.
• Changing the settings changes the signals completely — this is where overfitting happens.
• Bands work better in a range-bound market and less in a trend.
The most honest use of the bands is for context, not as a signal. They can tell you that the move is unusual — but whether an unusual move can continue further is something the bands will never tell you.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.