Bollinger Bandwidth
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Definition
Bollinger Bandwidth measures the width of the Bollinger Bands - (upper minus lower) divided by the middle band - distilling volatility into a single value; the 'Bandwidth percentile' ranks that width against its own history.
How to read it
Low Bandwidth means the bands are tight and volatility is compressed - a 'squeeze' that historically precedes large expansion moves (the 'Squeeze'). High Bandwidth means volatility is elevated and often near exhaustion of a big move. Because absolute width varies by instrument, the percentile form (e.g. 'Bandwidth in its 5th percentile over the past year') is what makes it comparable and actionable. Bandwidth says a move is coming; it does not say which direction.
How practitioners use it
Used as context among multiple indicators — never as a standalone signal to act.
Less common professional uses
Bandwidth is directionless and squeezes routinely resolve with a false breakout before the real move - wait for the expansion + a directional trigger; a squeeze alone is not a trade. Volatility mean-reverts and clusters, so extreme-low Bandwidth eventually rises, but timing is uncertain - a squeeze can persist far longer than expected; don't pre-position blindly. The percentile lookback choice changes the signal materially (a 1-year vs. 3-month percentile can disagree); fix a principled window rather than tuning it to fit past breakouts.
Sources & provenance
John Bollinger (BandWidth / The Squeeze)
This page is educational content published by Pachira Aquatica Global LLC. It is not investment advice and not a recommendation.