Bollinger Bands: Volatility, Not Direction

A Bollinger Band is a moving average (typically 20-period) with two bands plotted a set number of standard deviations above and below it. Because standard deviation is a measure of volatility, the bands widen when price is moving erratically and contract when price is calm. The bands themselves say nothing about direction — only about how much price has been moving.

Two opposite ways to trade the same indicator

• BB Squeeze Breakout — the bands compress to a multi-period low (volatility is unusually quiet), then price breaks out of the range. Low volatility tends to precede high volatility; the squeeze is the setup, the breakout is the trigger.
• BB Mean Reversion — price tags the outer band and reverts back toward the middle. This assumes the current move is stretched, not the start of a breakout — the opposite assumption of the squeeze setup.

Why both exist on the same indicator

This is the clearest example on ChartWyz of why context matters more than the indicator reading alone. A price tag on the outer band during a tight, range-bound market is a reasonable mean-reversion setup. The same tag during a strong trending breakout is often just the start of a much bigger move — mean-reversion would have faded a trend that kept going. Neither setup is 'more correct'; they're built for different market regimes, which is exactly why ChartWyz tracks win rate separately for each rather than blending them into one generic 'Bollinger Band' signal.