Bollinger Width

Bollinger Bands® measure volatility by placing trading bands around a moving average. These bands are charted two standard deviations away from the average, so as the average changes, the value of two standard deviations also changes. This value comprises the Bollinger Band® Width, representing the expanding and contracting of the bands based on recent volatility.

Bollinger Band® Width plots in a separate pane below the chart, whereas Bollinger Bands® plot as an overlay to the chart.

During a period of rising price volatility, the distance between the two bands will widen (BB Width will increase). Conversely, during a period of low market volatility, the distance between the two bands will contract (BB Width will decrease).

There is a tendency for bands to alternate between expansion and contraction. When the bands are unusually far apart, that is often a sign that the current trend may be ending. When the distance between the two bands has narrowed too far, that is often a sign that a market may be about to initiate a new trend.