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EUR/JPY Bollinger Bands Squeeze Follow Up

5 days ago, I published a new article about Bollinger Bands Squeeze and its importance. Please read it once again: Bollinger Bands Squeeze Is a Strong Signal

In this article, I am following up with the example of a current forming Bollinger Bands Squeeze pattern which is EUR/JPY. I reported this forming Bollinger Bands Squeeze on my article that was published 5 days ago.

If you refer to EUR/JPY daily chart, you will see the Bollinger Bands Squeeze I explained is still on going and has not been broken yet. The rule of trading the Bollinger Bands Squeeze says that first you have to wait for the price to hit the upper or lower band. That means the squeeze is broken and the market wants to head to a special direction: If it hits the upper band, it wants to go up and visa versa.

As you can see on the below chart, the 2017.01.09 daily candlestick upper shadow has crossed the upper band, but this is not what the rule means. I believe the candlestick body has to break above the upper band in order to come to this conclusion that bulls have taken the full control and the price wants to go up. This is something that experience has proven so far. If you want to trade the Bollinger Bands Squeeze breakout by following the above rule roughly, then chances are you make mistakes and you lose money. You have to be more careful and do your due diligence before risking any money.

As I explained, the 2017.01.09 daily candlestick crossed the upper band, but then it closed inside the squeeze which is still continued.

Bollinger Bands Squeeze on EUR/JPY Daily Chart

To lower the risk of trading the Bollinger Bands Squeeze breakout, you can consider the below item:

1) If there is a strong movement before the Bollinger Bands Squeeze, you are lucky because there is a higher chance that the market follows the same strong movement.

This is what you can see with the current EUR/JPY Bollinger Bands Squeeze (the big green arrow on the above chart). As there is a strong up movement before the Bollinger Bands Squeeze, there is a higher chance that the market breaks above the squeeze and goes up.

2) You can refer to the longer time frames and see how the overall market direction looks.

Although there is a strong up move before the Bollinger Bands Squeeze on EUR/JPY daily chart, this market is bearish on the weekly and monthly charts. So bears have the overall and long term control, although bulls take the control on the shorter time frames like daily and shorter. Even on the monthly chart, the Bollinger Middle Band is about 300 pips above the current market price (see below). Therefore, even if bulls take the control again and make the price break above the Bollinger Bands Squeeze, it can go up for more than 300 pips and then it is strongly possible that some strong bearish reactions appear.


EURJPY Weekly Chart


EUR/JPY Monthly Chart

3) One of the other strategies that some traders follow to take the advantage of the Bollinger Bands Squeeze breakout, is referring to the shorter time frames. This may help you monitor the breakout in more details and it can lower your mistake probability, although it can also cause you to make more mistakes.

Please note that the market is too slow when Bollinger Bands Squeeze forms. As a result, the signals and breakouts on the shorter time frames may not work accurately and can cause you to take a wrong position. So be careful.

For example, if you refer to EUR/JPY four hours chart now, you can see a Symmetrical Triangle that its support is broken by the 2017.01.10 20:00 four hours candlestick (see below). However, as you can see the next candlestick closed above the broken support line again. You can see this inaccuracy when the market is not liquid and is too slow. The price just moves without any goal because of some small transaction. Indeed, the big participants are sitting on the fence and so the market has no control for now. That’s why the breakouts are inaccurate.

If you follow the Bollinger Bands Squeeze breakout on the same time frame (daily in case of EUR/JPY), there is a less chance of making mistakes, if you really wait for a real and true breakout. As I mentioned above, one of the candlesticks bodies has to cross one of the bands strongly.

EUR/JPY Four Hours Chart

4) Experiences has proven that even in case of a strong and true breakout, there is still a chance of changing the direction right after the breakout. This is what you can see with some of the Bollinger Bands Squeeze breakouts.

Therefore, never take more than 2-3% risk even with the strongest trade setups and always have a solid and reasonable stop loss or exit strategy. If you get out with a 2% loss, you can easily take the other direction and recover the loss.

Good luck 🙂

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19 thoughts on “EUR/JPY Bollinger Bands Squeeze Follow Up
  1. Ben Aqiba Ben Aqiba says:

    Hello Chris,
    thank you for another valuable article.
    When you look at the weekly time frame,do you think the Bulls are strong and they are taken the control ,because Bollinger Band lines are far apart ?

    About BB Squeeze.You said the first squeeze is in most cases trend continuation patter.But what if the price break lower band ,does it means that downtrend will be continued according to your experience ?

    Thank you

    • LuckScout LuckScout says:

      Hi Ben,

      Thank you too.

      – They have taken the control but the overall trend is still down.

      – Yes, that is possible. We never know. We have to wait and see.

  2. thanks Chris for covering this pair eur/jpy in different time frames.

    we where talking about it in the eur/jpy confusion in the forums.

  3. Igor D. Igor D. says:

    Now even stronger BB breakout developed in the opposite direction.
    So one need to decide which is stronger.
    What we should consider to trade one or the other BB breakout?

  4. Nice read…I found it very helpful and enjoyable…

  5. N A N A says:

    Thank you Chris!

  6. Ben Aqiba Ben Aqiba says:

    Hi Chris,

    this is off topic ,sorry.
    Which score you would give to the setup from the chart below ?

    Thank you

    • LuckScout LuckScout says:

      Hi Ben,

      It is not 100 because it is the first reversal of a fresh down move. The market is bullish overall, but it is exhausted and so we are not in a consolidation. I would take the second long setup if it is as strong as this one while the market has been moving sideways for a while or if the consolidation looks matured.

  7. Gianni P Gianni P says:

    Hi Chris thank yuo very much for your effort in helping us,
    i was reading again this article because i don’t feel really confident in trading BBsqueeze, so i wanted to ask you a couple of question, i also take a screen shot of the chart of eur/jpy


    I sign two candle with numbers,
    the first one show a dark cloud cover with BUB breakout and also upper shadow that shows bearish pressure, also the weekly and monthly time frame show the same pressure,
    the second one should be the right entry for the BBS strategy, but after one candle it reverse,

    i would like ask you:
    1) will you avoid it because the candle number 2 is completely out the BLB,
    2) do you have any others things that you evaluate to be more confident in taking the position with the BBS strategy,

    thank in advance,
    i hope you are aving a great day.

  8. Ben Aqiba Ben Aqiba says:

    Hi Chris,

    about EURJPY. In your first chart, we can see strong Bullish movement on Daily chart,but the main trend is still Bearish .
    Would you take Bearish setup because on Daily time frame,which is against up trend on Daily TF,but in in accordance with main down trend on higher time frames, or you would wait only for Bullish setups ?

    Thank you

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