![]() ![]() While it was not a technical Bollinger Band Squeeze signal, you can still interpret it as a volatility contraction. The Band Width hovered above the 120-period low.The chart below shows a failed Bollinger Bands breakout followed by a successful one. The market continued rising over the next six bars, concluding with a profitable swing trade. (Notice that the bar preceding this signal bar had a shaved bottom, indicating extreme bullishness.) ![]() On 18 October 2006, the market closed above the Bollinger Bands and fired a buy signal.Here, the bottom panel showed that Band Width had dropped to its 120-day low.Despite such bearish price formations, the market did not fall much.Then, the following bar tried to rise above it but ended up as a bearish reversal bar. This tag of the Upper Bollinger Band met stiff resistance.This chart shows the daily candlesticks of Ameren Corp (NYSE). To highlight the lowest Band Width value in the past 120 periods, the charts below include a Donchian Channel applied on the Band Width values. Here, we use 120 periods on daily charts as an approximation. *John Bollinger stated six months in his book. Take on a short position when a candlestick closes below the 20-period Bollinger Lower Band.Wait for the 20-period Band Width to reach its lowest in the past 120 periods.Take on a long position when a candlestick closes above the 20-period Bollinger Upper Band. ![]() Wait for the 20-period Band Width to reach its lowest in the past 120 periods*.If you cannot find Band Width in your charting platform, use Standard Deviation instead.Īlthough they display different values, they work fine for relative comparison.īollinger Squeeze Trading Rules Long Squeeze The Bollinger Band Squeeze trading strategy relies on finding low values of Band Width to identify periods of low volatility.įrom there, we get ready for a Bollinger Band breakout from the consolidation area. ![]()
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