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 | Shows price relative to bands; a squeeze has no directional forecast | No; range magnitude only |
| Typical use | Describe relative price and volatility contraction | Scale exits or stops to recent range |
| Visual | Plotted on price chart | Plotted in separate pane |
| CommonQuant DSL | BB(20,2).upper / .middle / .lower | ATR(14) |
Frequently asked questions
How do Bollinger Bands and ATR differ for a stop rule?
ATR gives a recent range value that a stop can scale by, such as a chosen ATR multiple. Bollinger Bands show price relative to an average and its standard-deviation envelope. Neither chooses a safe stop distance automatically; test the rule against gaps, costs, and changing volatility.
Can I use Bollinger Bands and ATR together?
Yes. For example, use narrowing bands to identify a volatility contraction and ATR to size a proposed stop, then define a separate confirmation rule before entry. A band touch or low ATR alone does not establish a breakout or its direction.