Band width rises when volatility expands and falls when it contracts. Plotted as its own line beneath the chart, it converts the visual squeeze and expansion of bollinger-bands into a number you can compare across time and across instruments.
Its main use is regime identification. Band width at a multi-month low marks a bollinger-squeeze, which historically precedes expansion more often than continued quiet, though it gives no hint about direction.
Interpretation requires a reference. A band width of 4 percent means nothing in isolation; it means something relative to that instrument's own history. Always compare to a percentile of past readings rather than to a fixed threshold.
Related: bollinger-bands, bollinger-squeeze, percent-b, volatility-expansion, atr