Crypto Bollinger Bands: Volatility Envelopes, Squeezes, and Mean Reversion

How Bollinger Bands Are Built

Middle band is usually 20-period SMA.

Upper and lower bands add and subtract two standard deviations from that SMA.

• Bands widen when volatility rises
• Bands narrow when volatility falls — squeeze
• Default 20,2 — standard starting settings
• Works on any timeframe — match to hold duration

Band Touch in Range Markets

In sideways conditions, upper band touch often mean-reverts toward middle.

Lower band touch can bounce toward SMA.

• Fade upper band with resistance overhead
• Buy lower band with support below
• Stop outside band — volatility can expand
• Tight fade targets must clear round-trip fees

Walking the Band in Trends

Strong uptrend rides upper band — repeated closes near upper line.

Downtrend walks lower band — shorting upper touch fails repeatedly.

• Uptrend — buy pullbacks to middle band, not fade upper
• Downtrend — sell rallies to middle, not blind lower band buy
• Band walk — momentum rule, not mean reversion
• Wrong regime trade — fees plus stop outs compound

Bollinger Squeeze

Narrow bands signal low volatility compression.

Expansion after squeeze often follows with directional move.

• Squeeze — bands tightest in recent window
• Breakout direction — confirm with close outside band
• False break — close back inside — sit out
• Breakout taker entry — verify fee-adjusted measured move

%B and Bandwidth Helpers

Percent B shows where price sits inside bands — zero at lower, one at upper.

Bandwidth measures band width — quantifies squeeze.

• %B above 1 — price outside upper band — strong momentum or stretch
• %B below 0 — outside lower band
• Low bandwidth — squeeze candidate watchlist
• Use helpers to rank setups — still need price structure

Crypto Volatility Notes

Alts expand bands violently on news — stops must widen or size shrink.

• Funding spikes widen perp bands temporarily
• Weekend gaps on thin books — band pierce common
• Combine with volume on squeeze break
• Compare slippage and fees on breakout vs fade style

Quick Summary

Bollinger Bands frame volatility — fade in ranges, respect band walk in trends, trade squeeze expansions with confirmation.

Always net fees — band fades target small mean reversion moves.

• 20 SMA middle, 2 std dev outer bands
• Squeeze — low vol — then expansion
• Compare exchange fees on tight band scalps