What is BBW?
Bollinger BandWidth takes the distance between the upper and lower Bollinger Bands and divides it by the middle line, giving the band width as a percentage of price. It plots that in its own pane together with two fainter lines, the highest and the lowest BandWidth of the last 125 bars, so you can see at a glance whether the bands are near their widest or narrowest of recent history.
BBW measures volatility relative to price. It does not say which way price will move when the bands start to widen, and a low reading is not a signal on its own.
How to use BBW
- The squeeze. When BBW falls to or near the Lowest Contraction line, the bands are the narrowest they have been in the lookback. Quiet stretches like this are often followed by a larger move.
- Expansion. When BBW rises to or near the Highest Expansion line, volatility is at the top of its recent range. A move is already under way and may be closer to its end than its start.
- Percent, not price. Because the width is divided by the basis, BBW can be compared across a large price move and, with care, between markets.
- Direction comes from elsewhere. BBW only measures width. Use price or the bands themselves to judge which way a breakout from a squeeze goes.
These are ways to read volatility, not entry signals on their own.
Settings
| Setting | Default | What it changes |
|---|---|---|
| Length | 20 | Bars used for the simple average and the standard deviation behind the bands. Shorter reacts sooner; longer is smoother. Minimum 1. |
| Source | Close | Which price each bar contributes. Open, high, low and the averaged sources such as hl2 and hlc3 are also available. |
| StdDev | 2 | How many standard deviations each band sits from the basis. BandWidth scales in direct proportion, so doubling it doubles every reading. From 0.001 to 50. |
| Highest Expansion Length | 125 | Bars over which the highest BandWidth is taken for the upper reference line. Longer looks further back for the widest point. Minimum 1. |
| Lowest Contraction Length | 125 | Bars over which the lowest BandWidth is taken for the lower reference line. Longer looks further back for the narrowest point. Minimum 1. |
Adjust the band settings and the two lookbacks in the indicator settings.
Calculation
The indicator builds Bollinger Bands on a simple moving average, then expresses their width as a percentage of that average:
basis = SMA(close, 20)
sd = population standard deviation of the same 20 closes
upper = basis + 2 * sd
lower = basis - 2 * sd
BBW = (upper - lower) / basis * 100
Highest Expansion = highest BBW of the last 125 bars
Lowest Contraction = lowest BBW of the last 125 barsThe basis is always a simple moving average here; there is no basis type to choose, unlike on the Bollinger Bands overlay. Because upper minus lower is four standard deviations at the default, BBW works out to 4 * sd / basis * 100.
Both reference windows include the current bar, so a new extreme in BandWidth moves the matching reference line with it on the same bar.
Limitations
- A squeeze has no direction. Narrow bands say a larger move may be coming, not which way.
- Squeezes can persist. BandWidth can sit at or near its low for a long time, and a break can start, fail and fall back.
- The extremes are relative. The reference lines are the high and low of the lookback only. A new low after a quiet 125 bars may still be wide by longer-term standards.
- The live candle moves. The current bar's BandWidth, and any reference line it is setting, change until that bar closes.
- It is not a strategy. It describes volatility. It gives no entry, exit, sizing or risk management on its own.
Frequently asked questions
Bollinger BandWidth is the distance between the upper and lower Bollinger Bands divided by their middle line, shown as a percentage. It tracks how wide the bands are relative to price, which is a measure of volatility.
Look for BandWidth falling to or close to the Lowest Contraction line, which marks the narrowest reading of the last 125 bars at the default. That is the bands at their tightest in the lookback. It says a larger move may follow, not which way.
Yes. The indicator declares five inputs: Length, default 20 with a minimum of 1; Source, default close; StdDev, default 2, from 0.001 to 50; Highest Expansion Length, default 125 with a minimum of 1; and Lowest Contraction Length, default 125 with a minimum of 1. Open the indicator's settings on the chart to change them.
No. Each value uses only that bar and the ones before it, so values on closed bars are not revised. The current candle's reading moves while that candle is live and settles when it closes.
BandWidth is always built on a simple moving average, and there is no input to change that. The Bollinger Bands overlay lets you swap its middle line for other averages, so if you change it there, the two will no longer describe exactly the same bands.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in Bollinger BandWidth already applied. On any other market, open the indicator picker on the chart and choose Bollinger BandWidth from the Volatility group.