Bollinger BandWidth (BBW) on Gold

What it shows

Below the candles, the blue line is BandWidth itself. Above and below it run a red line, the widest the bands got in the last 125 candles, and a green line, the tightest they got in the same stretch.

How Pravex works it out

1. Build the usual bands: the simple average of the source over 20 candles is the middle, and the upper and lower bands sit 2 standard deviations away.
2. BandWidth = (upper band − lower band) ÷ middle band × 100. It is a percent of the middle line, so it is comparable as price moves up or down.
3. The red line is the highest BandWidth of the last 125 candles and the green line the lowest of the same 125.
4. Round numbers for the arithmetic: bands at 108 and 92 around a middle of 100 give (108 − 92) ÷ 100 × 100 = 16.

Settings

Setting	Default	What changing it does
Length	20	How many candles feed the middle line and the spread. A shorter length makes BandWidth react fast and jump around.
Source	Close	The price the bands are built on.
Band width in standard deviations	2	How many spreads away from the middle the bands sit. BandWidth scales directly with it: double the number, double the reading.
Widest-band lookback	125	How many candles the red line looks back to find the widest the bands got.
Tightest-band lookback	125	How many candles the green line looks back to find the tightest the bands got.

How traders read it

When the blue line sinks to the green one, the bands are as tight as they have been in the last 125 candles. That pinch is what people call a squeeze, and the next real candle out of it is the one to watch. It says a move is building, never which way.

When the blue line reaches the red one, the bands are as wide as they have been, so the burst of movement is probably already well along.

BandWidth has no fixed guides; the red and green lines are the yardstick. They roll with the window, so a reading that counted as tight last week can look ordinary today.

When it misleads

BandWidth says nothing about direction. A squeeze can resolve up or down, and a false start is common. Because the red and green lines look back 125 candles, a single sharp spike keeps the red line high for a long time and makes everything after it look quiet. On gold, BandWidth sags through calm stretches and rises when the candles widen, which in our own hourly measurements happens most in the New York morning. Gold has no weekend candles, so a Monday reading continues straight from Friday’s.

Questions and answers

What is a low Bollinger BandWidth?

It means the bands are close together because recent closes have stayed near their average. Compare it with the green line, the tightest of the last 125 candles, to see whether it is tight for this chart.

Does a squeeze tell me the direction?

No. BandWidth only measures the size of the gap. Direction comes from what price does when it leaves the quiet range.

Why does BandWidth double when I change the band width from 2 to 4?

Each band sits that many standard deviations from the middle, so the gap between them, and BandWidth with it, grows in proportion.

What is the difference between BandWidth and %b?

BandWidth is how wide the bands are. Bollinger Bands %b is where price sits between them.

Related: Bollinger Bands %b, Keltner Channels, Mass Index, Bollinger Bands, every indicator.