# Bollinger Bands

> Bollinger Bands is a volatility indicator that helps identify overbought and oversold levels. How to use Bollinger Bands in trading and Veles bots.

Bollinger Bands is one of the most well-known technical analysis indicators, developed by John Bollinger. It helps traders measure volatility and identify potential overbought and oversold levels of an asset.

## How Bollinger Bands Work

Bollinger Bands consist of three lines:

1. **Middle Band** — Simple Moving Average ([SMA](https://help.veles.finance/en/filters/sma/)) for the selected period.
2. **Upper Band** — SMA + *k* standard deviations (usually k = 2).
3. **Lower Band** — SMA − *k* standard deviations.

**How it works:**

When the bands widen, the indicator shows increasing volatility, and when they narrow, it shows a decrease in market activity.

The Veles bot implementation uses a standard deviation of **2** and the ability to work on different timeframes, from 1 minute and higher. A "Reverse Signal" option is also available, for switching the entry and exit logic.

## Bollinger Band Trading Signals

- **Candles closing below the lower band** is a Buy-signal (*open Long* or *close Short*).

- **Candles closing above the upper band** is a Sell-signal (*open Short* or *close Long*).

This approach can be used for both trend trading (for a breakout) and counter-trend trading (for a rebound from the channel boundaries).

## Advantages

- Shows the current market status: trend or flat.
- Helps find entry and exit points with high accuracy.
- Universal – works in all markets (cryptocurrencies, stocks, forex).
- Can be combined with other indicators to filter signals.

## Limitations

- In a strong trend, the price may remain outside the bands for a long time, giving false signals for a rebound.
- It is recommended to adjust the period and standard deviation multiplier for each instrument.
- Works best when combined with volume or trend filters.

## Using in Veles Bots  (Standard Indicator)

When trading with Bollinger Bands in the bot, you can set the following:

- Calculation timeframe (1 minute or higher).
- Trading direction (breakout or rebound).
- "Reverse signal" option to change the entry logic.
- Minimum PnL check to prevent closing deals at a loss.

## Using Veles in Bots (Flexible Indicator)

Bollinger Bands are divided into three argument options:

**Lower Band** - lower band, simple moving average minus K standard deviations,
**Middle Band** - middle band (simple moving average),
**Upper Band** - upper band, simple moving average plus K standard deviations.

You can set your own conditions for any of the bands.

Customizable indicator parameters:

- Period - number of candles for calculation. Range: 5–100, default 20.
- K - coefficient for determining the band width (number of standard deviations). Range: 0.5–4.0, default 2. This parameter affects only the upper band and lower band).
- Interval - candlestick timeframe.
- Method - calculation type. At bar close (once per selected interval) or per minute (once per minute for any interval).
- Shift - shifts the requested indicator value back by the specified number of candles.

## Bollinger Bands Width (BBW)

**Bollinger Bands Width** (BBW) is a derived indicator that measures the distance between the Upper and Lower Bands relative to the Middle Band. It is available as a standalone filter in the conditions selector.

### Formula

> **BBW = (Upper Band − Lower Band) / Middle Band × 100**

The result is expressed as a percentage and reflects the relative width of the channel.

### How BBW Works

1. When volatility rises — bands widen and the BBW value increases.
2. When the market quiets down — bands narrow and the BBW value falls.
3. An extremely low BBW value ("The Squeeze") often precedes a sharp price move.
4. After a squeeze, price typically breaks through one of the bands and a directional trend begins.

:::note[Note]
BBW only signals **increasing or decreasing volatility** — it does not indicate the direction of the move. A breakout after a squeeze can go either way. Always use BBW in combination with other indicators or filters.
:::

### Configurable Parameters

- **Length** — number of candles used to calculate the SMA. Range: 5–100, default: 20.
- **K** — standard deviation multiplier for the Upper and Lower Bands. Range: 0.5–4.0, default: 2.
- **Interval** — candle timeframe.
- **Method** — calculation type: on bar close or per minute.
- **Shift** — offset of the indicator value by a given number of candles back.

### Usage Examples

**Scenario: filtering entries by volatility level**

A bot trades using Bollinger Bands. You add a filter condition: open a trade only if `BBW < 5%`. This restricts entries to low-volatility periods ("squeeze"), when a strong breakout is likely.

---

**Scenario: avoiding flat market periods**

You want to avoid trading during consolidation. Add the condition `BBW > 10%` — the bot will only enter when the bands are wide enough and the market is in an active phase.

:::caution[Important]
BBW threshold values (e.g. 5% or 10%) are individual for each instrument and timeframe. Before using the filter, study historical BBW values for the specific asset.
:::

## Summary

Bollinger Bands is a time-tested tool that helps traders find strong entry and exit points.
When properly configured and combined with filters, they can form the basis of both scalping and medium-term strategies.