How to trade the Bollinger Bands Squeeze

Image 1: ADABTC - Bollinger Bands Squeeze

1. Requirements

1.1 Bollinger Bands Squeeze

The Bollinger Band Squeeze occurs when volatility falls to low levels and the Bollinger Bands narrow. According to John Bollinger, periods of low volatility are often followed by periods of high volatility. Therefore, a volatility contraction or narrowing of the bands can foreshadow a significant advance or decline.

1.2 Uptrend

An uptrend is active when the overall direction is upward. In an uptrend, the price is making higher highs and higher lows. As long as the price is making these higher highs and higher lows, the uptrend is considered intact. Once the price starts making lower highs or lower lows, the uptrend is in question or has reversed into a downtrend.

1.3 Resistance Break

A resistance break refers to when the price of an asset moves above a resistance area. Breakouts indicate the potential for the price to start trending in the breakout direction. A breakout to the upside from a chart pattern could indicate the price will start trending higher. Breakouts that occur on high volume show greater conviction which means the price is more likely to trend in that direction.

2. Example

Image 2: ADABTC - Bollinger Bands Squeeze - Checklist

2.1 Checklist

✅ In this example we received an alert by the CryptoCoinScanner of a Bollinger Bands Squeeze on 30/05/20 at 16:15.
✅ We clearly see that the price is in an uptrend. The price is making higher highs and higher lows.
✅ We identify the support and resistance zones (blue areas on chart)

Important: Don't buy yet!

2.2 Buy

Wait till the resistance is broken.

Image 3: ADABTC - Bollinger Bands Squeeze - Buy

At the blue vertical line we received the Bollinger Bands Squeeze alert.

At the first two orange lines we see a break of the Lower Bollinger Band so a possible reversal could be expected but the support isn't broken so our possible trade is still active.

At the last two orange lines we see a break of the Upper Bollinger Band so a possible breakout could be expected but the resistance isn't broken so we don't buy yet.

✅ Finally on 30/05/20 at 19:00 there is a close above the Upper Bollinger Band and the Resistance is broken. We can now active our trade at 0.00000750 BTC

2.3 Result

Image 4: ADABTC - Bollinger Bands Squeeze - Result

🚀 🏆 In this example we made more than 20% profit

Happy trading

CryptoCoinScanner Team