Volatility compression: what do you do with a squeeze?
Ranges tighten, Bollinger Bands pinch, and the market loads a spring. Compression precedes expansion — but the direction and timing are unknown, which is the entire problem.
What's your squeeze play?
- how you measure compression objectively
- whether you trade the break or wait for it
- how you handle the squeeze that never resolves
The Bollinger Bands guide covers the squeeze and its usual outcomes.
Background: Bollinger Bands explained: the squeeze, band walks and mean reversion
Bollinger Bands wrap a moving average in two volatility bands. Learn how they're calculated, what a squeeze means and why touching a band isn't a signal on its own.
What are the standard Bollinger Bands settings?
A 20-period simple moving average, with bands 2 standard deviations above and below it.
Is touching the upper Bollinger Band a sell signal?
Not on its own. In a strong uptrend price can ride the upper band for a long time. A touch shows price is stretched relative to recent volatility, which needs other evidence before it becomes a trade.
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