Price Breakout Strategy with Bollinger Bands Squeeze
This strategy is considered one of the most effective technical trading methods for capturing the start of strong trends after periods of low volatility. It is based on a key market principle: markets do not remain calm for long, but move from consolidation into sharp and powerful price movements.
1️⃣ The Squeeze Phase:
The strategy begins when the distance between the upper and lower Bollinger Bands narrows significantly. This reflects a clear decrease in volatility and signals the buildup of momentum ahead of an imminent price breakout.
2️⃣ Bullish Scenario (Buy):
Entry: Enter a long position when price breaks above the upper Bollinger Band and a full candle closes above it after the squeeze phase.
Trade Management: Stay in the trade as long as price remains above the middle Bollinger Band.
Exit: Take profits when a full candle closes below the middle band (the moving average).
3️⃣ Bearish Scenario (Sell):
Entry: Enter a short position when price breaks below the lower Bollinger Band and a full candle closes beneath it after the squeeze phase.
Trade Management: Maintain the sell position as long as price trades below the middle Bollinger Band.
Exit: Close the trade immediately when a full candle closes above the middle band.
Key Tip:
The longer the Bollinger Bands remain compressed, the stronger and more sustained the upcoming price breakout is likely to be. Patience is essential—wait for a clear candle close outside the bands to confirm the direction.
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