Bollinger squeeze breakout

Breakout · Difficulty: Intermediate

Education only. Delayed data. Past results do not predict future results. Not financial advice, and no strategy here promises a profit. Every strategy can lose money, and a rule that worked on past charts may stop working. Practise with virtual money first.

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The idea

When the bands narrow, volatility is unusually low. Quiet periods often end with a larger move, though the squeeze does not tell you which way.

Indicators and settings

Bollinger 20, 2; MACD 12, 26, 9 for direction; Volume.

Entry rule

Spot a visible narrowing of the bands. Consider entering in the direction of the first strong close outside a band, when volume is above its recent average and MACD agrees.

Exit rule

Trail a stop behind the middle band, or exit when a candle closes back inside the bands against you.

Stop-loss and risk rule

Stop on the other side of the middle band or 1.5 × ATR away. Small size: many breakouts fail.

Best conditions

After a quiet consolidation, ahead of news or at the start of a session.

Pitfalls

False breakouts that snap back inside the bands.
Direction cannot be known in advance.
Volume is not supplied for every asset on our feeds.

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Illustration only; ignores slippage, tax and most costs. Not financial advice.