Bollinger Band Squeeze

A Bollinger Band Squeeze is a technical pattern that occurs when the upper and lower bands of a Bollinger Band indicator contract, signaling a period of low volatility. This contraction indicates that the market is consolidating and preparing for a significant move.

The squeeze is considered a precursor to a breakout, as the compression of volatility is usually followed by a sharp expansion. Traders watch for this pattern to anticipate high-volatility events, using it to time their entries or exits.

It is a powerful tool for identifying the transition from a quiet market to a trending one. When the bands begin to expand after a squeeze, it often confirms the direction of the new trend, allowing for strategic positioning.