The “Bollinger Squeeze” is pretty self-explanatory.
When the bands squeeze together, it usually means that a breakout is getting ready to happen.
If the candles start to break out above the TOP band, then the move will usually continue to go UP.
If the candles start to break out below the BOTTOM band, then the price will usually continue to go DOWN.
Looking at the chart above, you can see the bands squeezing together. The price has just started to break out of the top band. Based on this information, where do you think the price will go?
If you said up, you are correct again!
This is how a typical Bollinger Squeeze works.
They designed this strategy for you to catch a move as early as possible.
Setups like these don’t occur every day, but you can probably spot them a few times a week if you are looking at a 15-minute chart.
There are many other things you can do with Bollinger Bands, but these are the two most common strategies associated with them.
Go ahead and add the indicator to your charts and watch how prices move regarding the three bands. Once you’ve got the hang of it, try changing up some of the indicator’s parameters.
It’s time to put this in your trader’s toolbox before we move on to the next indicator.
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