Bollinger Band Basics Bollinger bands were created by John Bollinger, a well-known commodity trading advisor. The primary benefit of using Bollinger bands is that it helps in evaluating the overall volatility within a specific market. Let's now take a closer look at the default Bollinger band settings. The Bollinger band is comprised of three lines. The central line is a simple moving average line with a 20 period lookback. The upper line of the Bollinger band is computed as being two standard deviations above the central SMA line. And similarly, the lower line of the Bollinger band is calculated as two standard deviations below the central SMA line. One of the important characteristics of Bollinger bands is that as markets become more volatile the bands will tend to widen. And when the markets become less volatile the bands will tend to narrow. This is an important feature within the Bollinger band that we should keep in mind, especially as it relates to the Bollinger band squeeze set up that will be demonstrating shortly. Take a look at the image below which shows these three components of the Bollinger band.