Bollinger Bands vs ATR
Bollinger Bands and ATR are both volatility indicators, but they express volatility differently. Bollinger Bands show volatility as price bands around a moving average; ATR quantifies it as a single number representing average price movement.
Side-by-side comparison
| Feature | Bollinger Bands | ATR |
|---|---|---|
| Type | Volatility bands (price-based) | Volatility measure (range-based) |
| Output | Upper/middle/lower bands | Single value (avg range) |
| Direction info | Yes (price vs bands) | No (magnitude only) |
| Best for | Mean reversion & breakout detection | Stop sizing & risk management |
| Visual | Plotted on price chart | Plotted in separate pane |
| CommonQuant DSL | bb_upper(), bb_middle(), bb_lower() | atr(period) |
Frequently asked questions
Which is better for setting stop losses?
ATR is better for stop-loss placement because it gives a concrete volatility value you can multiply (e.g., 2× ATR). Bollinger Bands are better for identifying where price might reverse.
Can I use Bollinger Bands and ATR together?
Yes — they complement each other well. Use Bollinger Bands for entry/exit signals (band touches) and ATR for position sizing and stop placement. A Bollinger squeeze combined with low ATR is a strong pre-breakout signal.