Bollinger Bands
Bollinger Bands draw 'the lane price usually travels in.' The middle line is the average of the last 20 candles, and the upper and lower bands sit at 2x the standard deviation above and below it. Standard deviation sounds intimidating, but just think of it as 'how much price usually wiggles.' For example, if the 20-candle average is 100 million won and the usual wiggle is about 1 million won, the upper band sits at 102 million and the lower band at 98 million.
Statistically, price spends most of its time inside these bands. So a close below the lower band reads as 'sold off harder than usual,' and a close above the upper band as 'up more than the usual range.' That much is fact — everything after that is interpretation.
The interpretations split two ways. One camp says 'it strayed too far, it will revert to the middle' and bets on the opposite direction. The other says 'anything strong enough to punch through the band will keep going' and bets on the same direction. Two opposite strategies exist for the same picture — which tells you that breaking a band, by itself, says very little about direction.
The classic trap is riding the bands. In a strong trend, price often hugs the upper (or lower) band and keeps going right along with it. If you keep buying every 'lower-band break means bottom' in a downtrend, losses can pile up all the way down.
The width of the bands is information too. When price is quiet the bands narrow (a squeeze); when it's choppy they widen. Big moves sometimes erupt after a tight squeeze, so many traders treat it as 'the calm before the storm' — the catch is that you can't know in advance which direction it will erupt.
What the data actually shows
Barobara counts every past instance of Bitcoin closing outside its Bollinger Bands and publishes where price actually went next. You can check how well the 'lower-band break means bounce' folklore holds up in the actual data — mostly, it doesn't stray far from a coin flip. See the lower-band break (1h) actual results and upper-band break (1h) actual results. For what happens after a squeeze, see squeeze + upside and squeeze + downside.Common misconceptions
The most common misconception is 'touching the lower band = buying opportunity.' In strong downtrends, price riding the lower band for weeks while it keeps sliding is genuinely common. A band break is a factual marker that says 'bigger move than usual' — not a bottom marker. Another one is the statistical claim that 'price is inside the bands 95% of the time, so being outside is abnormal and must revert.' That 95% figure assumes prices follow a normal distribution, and real market prices break that assumption all the time. Extreme moves happen far more often than textbook statistics suggest.
FAQ
Q. Does price bounce after breaking below the lower Bollinger Band?
Sometimes it bounces, sometimes it keeps falling. When Barobara counted every past instance, neither outcome was dominant. In sharp sell-offs especially, band-riding — price sliding on and on below the lower band — is common, so entering on the break alone is risky.
Q. When the bands tighten (a squeeze), a big move is coming — true?
The tendency for volatility to expand after quiet stretches does exist in markets. The problem is direction. The squeeze itself can't tell you whether it breaks up or down, and fake-outs — tilting one way, then erupting the other — are frequent. Check the actual distribution on Barobara's squeeze signal pages.