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Bollinger Upper (20)

Bollinger Upper (20)

The upper Bollinger band is the mid line plus a volatility buffer. Price touching it can signal strong upside or possible overextension.

How it relates

Bollinger Mid (20)The 20-period Bollinger middle line is usually a moving average of the price. It is the center of the Bollinger Band.+Bollinger Bandwidth (20)Bollinger bandwidth measures how wide the bands are relative to the middle line. Wider bands mean higher volatility.=Bollinger Upper (20)
(Closing PriceClosing price is the last traded price of the period. It's the most common reference price for charts and indicators.−Bollinger Lower (20)The lower Bollinger band is the mid line minus a volatility buffer. Price touching it can point to strong downside or possible exhaustion.)÷(Bollinger Upper (20)−Bollinger Lower (20)The lower Bollinger band is the mid line minus a volatility buffer. Price touching it can point to strong downside or possible exhaustion.)=%B (Bollinger 20)%B shows where price sits between the lower and upper Bollinger bands. 0 means at the lower band, 1 at the upper band.

The upper Bollinger band is the mid line plus a volatility buffer. Price touching it can signal strong upside or possible overextension.

The calculation:

Upper Band = Middle Band + (2 × Standard Deviation of price over 20 periods)

What the upper band represents:

<ul>
  • Volatility boundary: Approximately 2 standard deviations above the mean
  • Statistical level: About 95% of price action should occur within the bands
  • Dynamic level: Expands in high volatility, contracts in low volatility

    • How to interpret:

    • Touching the band: Indicates strong momentum but also potential overbought conditions
    • Walking the band: In strong trends, prices can ride along the upper band
    • Breaking above: Unusual strength; may indicate breakout or exhaustion
    • Reversing from band: Often signals short-term pullback opportunity

    Trading applications:

    • Profit targets: Upper band can serve as target for long positions
    • Mean reversion: Some traders sell when price reaches the upper band
    • Trend confirmation: Consistent touches indicate strong trend
    • Squeeze breakouts: Band expansion after squeeze can signal new trend

    The upper band is not a sell signal by itself. In strong uptrends, prices can persistently touch or exceed the upper band while continuing higher.