Key Points

  • Bollinger Bands are a volatility indicator built around a moving average, showing when price is relatively tight or stretched.
  • Bollinger Bands indicator basics: middle band is a moving average, upper and lower bands expand and contract based on volatility.
  • Bollinger Bands squeeze meaning: bands tighten when volatility is low, often before a larger move, but direction still needs confirmation.
  • To use Bollinger Bands in crypto properly, focus on volatility changes, trend context, and whether price holds or rejects the middle band.
  • Bollinger Bands settings in crypto are often the default 20-period with 2 standard deviations, and beginners should start there for consistency.
  • Bollinger Bands strategies for beginners work best when you avoid treating “touching the band” as an automatic reversal signal.
  • If any terms feel unfamiliar, use the Crypto Glossary for quick definitions, then return to this lesson.

Quick Answer

Bollinger Bands are an indicator that places an upper and lower band around a moving average to reflect volatility. When the bands widen, volatility is increasing. When the bands tighten, volatility is low, which is called a Bollinger Bands squeeze. In crypto, Bollinger Bands are best used to understand volatility and trend behaviour, not as a standalone signal, because price can “walk the band” in strong trends and touching a band does not automatically mean reversal.

Where This Lesson Fits

Lesson 14 introduced MACD as a momentum tool built from moving averages and explained how to read the MACD histogram and signal line. Lesson 15 shifts to volatility, teaching Bollinger Bands so you can recognise when the market is quiet, when it is expanding, and how price behaves around a moving average envelope.

This lesson is part of the Technical Analysis for Beginners series. For the full lesson map and all supporting guides, visit the Technical Analysis for Beginners Hub.

What Are Bollinger Bands?

Bollinger Bands consist of three lines:

Bollinger Bands are built from:

  • a middle band, usually a 20-period moving average
  • an upper band
  • a lower band

The upper and lower bands are placed a certain distance from the middle band based on standard deviation, which is a measure of volatility.

So when volatility rises, bands expand. When volatility falls, bands contract.

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Bollinger Bands Indicator, What It Measures

Bollinger Bands measure volatility and relative extension.

They help you see:

  • whether price movement is calm or aggressive
  • whether price is stretched relative to its recent average
  • whether volatility is compressing or expanding
  • how price behaves around the middle band during trends

How To Use Bollinger Bands In Crypto

There are three beginner-friendly ways to use them.

1) Use The Bands To Read Volatility

This is the main value.

Watch:

  • narrow bands, low volatility
  • wide bands, high volatility

Volatility expansion is often where moves travel further and faster. Volatility compression is often where ranges develop.

2) Use The Bollinger Bands Squeeze

The squeeze is when bands get unusually tight.

Bollinger Bands squeeze meaning:

  • volatility has compressed
  • price is moving in a narrow range
  • the market is storing energy for a larger move

But direction is not guaranteed.

A useful confirmation layer is:

  • identify the range boundary
  • watch for a break and hold beyond it
  • check whether volume expands as the range breaks

This keeps you from guessing direction.

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3) Use The Middle Band As A Trend Guide

The middle band is usually a moving average.

In trending conditions, price often interacts with the middle band in a repeatable way.

In an uptrend:

  • pullbacks may hold around the middle band
  • price can “ride” the upper band during strong momentum

In a downtrend:

  • relief rallies may reject around the middle band
  • price can “ride” the lower band during sustained weakness

This is why touching a band is not automatically a reversal signal.

Bollinger Bands Strategy For Beginners, What To Avoid

Many beginners misuse Bollinger Bands.

Avoid these common mistakes:

  • selling just because price touches the upper band
  • buying just because price touches the lower band
  • ignoring the trend state and key support and resistance
  • ignoring volatility context, tight vs wide bands
  • treating the squeeze as guaranteed breakout direction

A better approach is: use the bands to frame volatility and trend behaviour, then confirm with price and levels.

Bollinger Bands Settings Crypto, What Works

The most common settings are:

Standard settings are:

  • 20-period middle band
  • 2 standard deviations

Beginners should start with defaults. If you change settings too early, you lose comparability across charts and timeframes.

If you adjust settings, do it for a reason:

  • slower settings for higher timeframe context
  • faster settings for shorter timeframe sensitivity

A Simple Bollinger Bands Checklist

If you want a routine you can repeat:

Mark:

  • whether bands are tight, normal, or wide
  • the nearest support and resistance zone

Check:

  • is price respecting the middle band in a trend?
  • is price walking the upper band or lower band?
  • is a squeeze forming near a key level?

Then:

  • wait for a break and hold if the squeeze is the main story
  • treat band touches as context, not as automatic reversals
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Mini FAQs

What are Bollinger Bands in crypto?
Bollinger Bands are a volatility indicator that places an upper and lower band around a moving average, expanding and contracting as volatility changes.

How do you use Bollinger Bands?
Use them to read volatility, identify squeezes, and watch how price behaves around the middle band in trends.

What does Bollinger Bands squeeze mean?
A squeeze means the bands have tightened, showing low volatility and often preceding a larger move, but direction still requires confirmation.

What are Bollinger Bands settings in crypto?
Common settings are 20 periods and 2 standard deviations. Beginners should start with defaults for consistency.

Are Bollinger Bands a good strategy for beginners?
Yes, if used to understand volatility and trend behaviour. They are less helpful if used as an automatic reversal signal when price touches a band.

Why does price ride the Bollinger Bands?
In strong trends, price can stay near the upper band in uptrends or the lower band in downtrends, reflecting sustained momentum, not immediate reversal risk.

Next Lesson

In this lesson you learned what Bollinger Bands are, how the Bollinger Bands indicator reflects volatility, what the Bollinger Bands squeeze meaning is, and how to use Bollinger Bands in crypto without treating band touches as automatic signals.

Next, Lesson 16 covers Fibonacci retracement levels, a widely used tool for mapping potential reaction zones during pullbacks and rebounds.

For the full lesson map and all supporting guides, visit the Technical Analysis for Beginners Hub.

If this lesson helped you read volatility conditions and stop treating indicators as shortcuts, Alpha Insider is where these tools are applied with consistency, across a structured TA curriculum that builds real skill over time.

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Volatility… understood, not feared.

This content is for education and information only and should not be considered financial, legal, or tax advice. Crypto assets are volatile and high risk. You are responsible for your own research and decisions, and you should consider seeking independent professional advice where appropriate.