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Bollinger Bands 101: Your Guide to Reading Crypto Price Action Like a Pro

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If you’ve been staring at crypto charts wondering what those three squiggly lines mean, welcome to the Bollinger Bands club.

Developed by John Bollinger in the 1980s, this tool measures how wild the price swings are and spots potential trend reversals. Think of it as your market’s mood ring—it tells you when things are about to get spicy.

What’s the Core Idea?

Bollinger Bands are three lines:

  • Middle band: 20-day moving average (the trend baseline)
  • Upper band: Middle band + (2 × standard deviation)
  • Lower band: Middle band − (2 × standard deviation)

Standard deviation = how much prices bounce around. High volatility = wider bands. Low volatility = tighter bands.

Reading the Signals

Price touching the upper band? Asset might be overbought—pullback incoming.

Price touching the lower band? Oversold territory—bounce play forming.

Price breaks outside the bands? Major move could be brewing—this is when things get interesting.

Why Crypto Traders Love This

Crypto moves FAST. Bitcoin can pump 20% in a day or dump just as hard. Bollinger Bands help you spot when momentum is exhausted and reversals are likely. Perfect for a market this volatile.

Pro Tips for Crypto Trading

  1. Adjust for your timeframe: Using 20-day MA for hourly charts? That’s weak. Shorter timeframes need fewer periods; longer ones need more.

  2. Pair it with other tools: Don’t rely on Bollinger Bands solo. Use RSI, MACD, or volume confirmation to avoid fake-outs.

  3. Account for liquidity: Different altcoins have different volatility profiles. Adjust your standard deviation multiplier accordingly.

  4. Watch for squeeze plays: When bands get super tight = volatility is low. When they expand = major move incoming.

The Bottom Line

Bollinger Bands are one of the best tools to gauge momentum and spot reversals, but they’re not a crystal ball. Combine them with other indicators, manage your risk, and you’ll have a solid edge in the crypto casino.

Remember: No single indicator wins the game. It’s the combo that counts.

BTC-1.28%
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
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