when the bands widen after a period of contraction during a squeeze many consider this a sign that a breakout is about to occur while the bands themselves do not indicate the direction of the breakout investors can assess the potential direction by comparing the price s movement to the bands and other indicators 
the increased volatility signaled by widening bollinger bands might prompt investors to reassess their risk management strategies they might cut their positions or diversify their holdings to manage the higher risk associated with greater price fluctuations a contraction of the bands suggests that the market is experiencing less volatility price movements are more contained and there may be less trading volume or market interest in the short term this reduced volatility period can be seen as a time of consolidation 10while tightening bands indicate less volatility market analysts often consider this a precursor to major price moves or breakouts traders monitor squeezes closely since they suggest the market is building energy for a significant change the longer the squeeze the more potent the subsequent breakout is expected to be this is based on the principle that periods of low volatility are frequently followed by periods of high volatility however this doesn t mean you ll know where the breakout will head during a tightening period traders may adjust their risk management strategies such as pulling in stop loss orders to reflect lower volatility while preparing for a potential increase ahead the tightening of bollinger bands could also mean there s no consensus among market participants about the future direction of the price this indecision can result in the price oscillating within a tighter range until new information arrives or the market forces a breakout 