Bollinger Bands® Squeeze is a strong trading strategy. It is not the fist time that we are talking about this trading strategy on this site. Please watch This Video carefully and then read the below articles:
- Bollinger Bands Squeeze: What Is It and How to Trade It?
- Stochastic, RSI and MACD Positions in a Bollinger Bands Squeeze Breakout
- Forming Bollinger Bands Squeeze on GBP/USD Daily Chart
What Is Bollinger Bands Squeeze?
When Bollinger Upper and Lower Bands get too close and become almost parallel with each other, we call it Bollinger Bands Squeeze:
Make sure to watch This Video carefully, because it explains about Bollinger Bands Squeeze in more detail.
How Can You Trade Bollinger Bands Squeeze Pattern?
First, you need the market to have already formed a strong movement, before it forms a Bollinger Bands Squeeze pattern:
Second, you need the market to slow down, move sideways, and so the Bollinger Upper and Lower Bands get close to each other and form the Bollinger Bands Squeeze pattern, which is what you can see on the above example.
Third, you need to locate the Bollinger Bands Squeeze pattern’s resistance line, in case the strong movement that was formed before the Bollinger Bands Squeeze pattern is an upward movement, and visa versa, which means you need to locate the Bollinger Bands Squeeze pattern’s support line, in case the strong movement that was formed before the Bollinger Bands Squeeze pattern is a downward movement:
Then, you must wait for the resistance/support line to become broken. In case of a resistance line, if one of the candlesticks closes above the resistance line, it means it is broken. In case of a support line, if one of the candlesticks closes below the support line, the line is broken:
Then, you can take a position once the candlestick that has formed the breakout closes. Stop loss can be placed below the low price of the candlestick that has broken above the resistance, or above the high price of the candlestick that has closed below the support line. Take profit order can be at least x3 of the stop loss size.
To learn more about Bollinger Bands indicator, please read this article: Bollinger Bands in Forex and Stock Trading [With Detailed Pictures]