Volatility and bands
Bollinger bands, the squeeze and ATR — how much, never which way.
Build Bollinger bands from a column of closes with a standard deviation worked by hand, and read a band touch as a statement about spread rather than a boundary. Describe a squeeze as contracted volatility with no direction attached, see why a band touch and an RSI extreme usually arrive together, compute a true range across a gap, and express a distance in ATRs.
5 chapters · 6 quiz questions · 11 terms · included with a plan
Otus, on this module
Everything in this module measures size. Not direction — size. Bollinger bands measure how far the closes wander from their average; ATR measures how far the bars travel. If you catch yourself reading a direction off either of them, stop and ask which input told you that. Neither has one.
The chapters
Each module ends with you doing what it taught — a written answer Otus reads, and a quiz.
- 01 · Read
Bollinger bands are a measure of spread
A moving average, plus and minus two standard deviations, worked by hand.
- 02 · Read
The squeeze, and Bollinger plus RSI
Contracted volatility with no direction — and two readings that share their inputs.
- 03 · Read
Average true range, worked through
The gap that ordinary range misses, Wilder's average, and distances in ATRs.
- 04 · Watch
Watch: Bollinger Bands
One minute, then the step ticks itself.
- 05 · Write
In your own words
Two or three sentences. Otus reads them.
- 06 · Quiz
Six questions
A wrong answer still pays. It costs the combo, not the XP.
11 terms this module defines
The same definitions Otus uses in the lessons. All of them are in the trading glossary.
- Bollinger bands
- A 20-period simple average of the closes with bands two standard deviations above and below it. A measure of how widely the recent closes spread around their average.
- Standard deviation
- How far a set of numbers typically sits from its own average: the square root of the average squared distance. Bollinger bands use it on the closes of the window.
- Middle band
- The simple moving average the bands are built around, 20 periods by default. Everything said about moving averages, including their lag, applies to it.
- %b
- Where the close sits between the bands: 0 at the lower, 1 at the upper, 0.5 at the middle. Above 1 means outside the upper band. A position relative to recent spread, nothing more.
- Bandwidth
- The distance between the bands divided by the middle band. Lets the width be compared over time; a low value means the recent closes have been very similar.
- Squeeze
- Bandwidth at a low value relative to its own history: volatility has contracted. It contains no direction, no timing and no size for whatever comes after.
- Walking the band
- Close after close near one band while the band moves with them — what a steady trend looks like on Bollinger bands. A one-sided sequence, not a stretched market.
- Bollinger plus RSI
- Pairing a band touch with an RSI extreme. Both are computed from the same recent closes and usually fire on the same bar, so the pair is one event described twice.
- True range
- The largest of high minus low, high minus previous close, and previous close minus low. Ordinary range plus any gap from the previous close.
- Distance in ATRs
- A price distance divided by the current ATR. Turns "ten points" into "two and a half typical bars", which means the same thing on a quiet day and a busy one.
- Volatility clustering
- Quiet stretches tend to be followed by quiet ones and busy by busy, until they are not. A regularity about the size of moves that says nothing about their direction.
Finishing it pays 150 XP and 3 keys on the game board, on top of what each chapter earns. XP measures what you learned — never what you earned. How levels work.
Education only. Nothing here is a recommendation to buy or sell anything; the school teaches reading charts, never predictions.
Start with lesson one.
The first modules, Otus as your tutor and the game board are free. No card needed.