Bollinger Band squeeze – Using this Bollinger Band strategy to determine volatility
In this Bollinger Band strategy, you’re using an indicator called the ‘band width’. The band width is calculated by this formula:
- Band width = (upper Bollinger Band value – lower Bollinger band value) / middle Bollinger Band value.
The essential meaning of this Bollinger band strategy is that you’re watching for volatility levels to fall extremely low, and for the Bollinger Band to narrow. This contraction of the Bollinger Bands will often indicate a period of high volatility shortly afterwards, so you’re entering the trade when this period of low volatility peaks.
It can go either way however, depending on the direction in which the Bollinger Band contracts. A new advance would start with this squeeze, and a break above the upper band. A new decline would start with a squeeze, and break below the lower band. On our CAPEX.com platform, determining this Bollinger band strategy will be simple, our chart displaying the squeezing clearly.
Conclusion – A useful Bollinger Band strategy helps you get the hang of trading
To wrap up, we, at CAPEX.com, believe there’s always a place for a Bollinger Band strategy. It is one of many useful momentum strategies that is guaranteed to make you a profit in unstable markets. And, we provide everything you need to master a Bollinger Band strategy – from our great software, our many instruments and all the resources at your disposal. This momentum trading strategy is reliant on volatility, and trends, so you have to pick instruments that will provide that, and you’ll quickly figure out how the band can work to your advantage. So, sign up to CAPEX.com now, and try out your Bollinger Band strategy!