Swing Strategy Simple #3: (Bollinger Band Squeeze Swing Trading System)

Overview Of The Bollinger Band Squeeze Swing Trading System

The Bollinger band squeeze swing trading system is a very simple trading system that is easy to implement.

One of the main characteristics of a Bollinger band is that it becomes narrower as price volatility decreases, most of due to price moving sideways and in a tight range.

You may call it  the “Bollinger band squeeze.”

When such situations happen, the market may be due for a breakout to the upside or the downside. Look at the chart below: before the candlestick that breaks out of the upper band, notice the upper and lower bands of the Bollinger bands being squeezed tight? After some time, the price breaks the upper band and continues to go up.

That’s the beauty of the Bollinger band indicator : tells you that the market is being squeezed into a tight trading range and you should expect a breakout.

The Rules Of The Bollinger Band Trading System

1. As the Bollinger band squeezes, watch for a candlestick breakout of the either the upper or lower band.
   
2. After that candlestick breaks out and closes either above or below the band, place a buy stop order 5 pips above the high of the breakout candlestick if it breaks out of the upper band.
3. If a candlestick breakout a lower band, place a sell stop order 5 pips below the low of that candlestick only after it closes.
4. Your stop loss should be placed 5 pips above the high (if you use sell stop order) or 5 pips below the low of the breakout candlestick if you use a buy stop order.
5. Take profit options:(a) place take profit target at 3 times what your risked (b) or place your take profit target at a previous significant swing high or low point (c) or you may trail stop and continue to lock in your profits as price continues to move favorably until you get stopped out in profit.

ADVANTAGES OF THE BOLLINGER BAND SQUEEZE TRADING STRATEGY

• bollinger band squeeze indicates to you in advance that a price breakout may be imminent.
• so when the breakout happens, you have the opportunity to capitalize on that breakout.
• you can use this trading strategy in all timeframes

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