How to use Bollinger Bands on crypto charts
Published · by Hunt4Coin
Bollinger Bands are a moving average (usually the 20-period simple moving average) with one band a set number of standard deviations above it and one below (usually 2), so the bands widen when price swings more and tighten when the market goes quiet.
What the three lines mean
| Line | Default | What it shows |
|---|---|---|
| Middle band | 20-period simple moving average | The recent average price |
| Upper band | Middle + 2 standard deviations | Where price is unusually high compared with the last 20 candles |
| Lower band | Middle − 2 standard deviations | Where price is unusually low compared with the last 20 candles |
Two numbers come from the bands:
- %B says where price sits inside them: 0 is the lower band, 100 (or 1.0) the upper band, 50 the middle. Above 100 means price closed outside the upper band.
- Band width is the distance between the bands as a % of the middle band. A low width means volatility is low.
Step 1: read volatility first, direction second
Bollinger Bands measure how much price is moving, not which way it will go. Wide bands mean a big, fast market; narrow bands mean a quiet one. Start every read by asking "is volatility high or low compared with recent weeks?"
Step 2: spot the squeeze
A squeeze is when the bands get unusually tight, often near their narrowest in months. Quiet periods tend to be followed by bigger moves, but the squeeze doesn't tell you the direction. Many traders wait for a candle to close outside a band after a squeeze, ideally with volume above its 20-bar average, and treat that close as the first sign of direction.
Step 3: a touch of the band is not a signal on its own
In a range, price often turns near the bands. In a strong trend, price can walk the band: close at or outside the upper band candle after candle. Selling every upper-band touch in an uptrend is one of the most common ways to lose with this indicator. Check the trend first, for example whether price is above the EMA 200 and whether ADX is above 25.
Step 4: use the middle band in trends
In an uptrend, pullbacks often stop near the middle band; a close below it is an early sign the trend is weakening. In a downtrend, the reverse. Combining the middle band with RSI (is it holding above 50?) gives a second view of the same move.
Step 5: match the settings to the timeframe
20 and 2 are the classic settings and a good default on 1h, 4h and 1d charts. On 1-minute and 5-minute charts the bands react to every small spike, and fees eat a large share of small moves. Changing the settings to fit past data is easy; whether they still work afterwards is what a backtest is for.
Common mistakes
- Treating the bands as support and resistance in a trend. Strong trends ride the band.
- Guessing the breakout direction during a squeeze. Wait for a close outside the band, or a confirmation from volume or momentum.
- Using Bollinger Bands alone. Pair them with a trend filter (EMA 200, ADX) and a momentum indicator (RSI, MACD).
- Reacting to the live candle. A candle can poke outside a band and close back inside; closed candles are what count.
- Over-tuning the length and multiplier to past data, then expecting the same results.
- Ignoring fees on short timeframes, where band-to-band moves can be smaller than the cost of the round trip.
Try it free
- On any Hunt4Coin candle chart, open Indicators and add Bollinger Bands (length 20, StdDev 2 by default; you can change both and the basis average type). Indicator list.
- In the crypto screener, use the ready-made Bollinger squeeze scan (band width below 4%) to find top-100 coins with very tight bands on 15m, 1h, 4h or 1d, or build your own rule on Bollinger %B and Bollinger width %, for example %B above 100 with volume more than 2× its 20-bar average. On the market list, Filters also has Bollinger position (above the upper band, below the lower band, upper or lower half) and band width.
- Set an alert such as "price crosses above Bollinger upper (20, 2)" on the 4h chart, checked on closed candles and sent to Telegram, Discord, email or the browser. Alerts docs.
- Test a rule like "buy when price crosses above the Bollinger middle while above the EMA 200" in the backtester with fees before using it, and practise it with pretend money in paper trading.
More guides: how to read RSI and MACD, RSI divergences, how to use a crypto screener and how to backtest with fees.
Information only, not financial advice. Bollinger Bands describe past volatility; they don't predict where price will go.