Bollinger Band Strategy Explained for Beginners

We, at, understand that getting a handle on Bollinger Bands can be tricky. A Bollinger band strategy is using the Bollinger band tool to determine entry and exit points of a trade.

Here, we’re going to cover what kind of Bollinger band strategy you can use, and how to master the craft of Bollinger Bands on our platforms.

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Variety of instruments and markets

We, at, always put variety as our focus. We have every instrument you can imagine – from CFDs on Forex, stocks and crypto, to CFDs on bonds, indices and commodities. And, with the large selection of trades that go along with that, using a Bollinger Band strategy with any one of these instruments has never been made easier. Want to get into cryptocurrency, and have a look at a commonly overbought cryptocurrency, like Tron coin?

All you do is put your Bollinger Band over our chart, and start to prepare yourself for the eventual uptrend. Or, maybe you’d like to focus on something else, and choose an oversold Forex trade? No problem. Go position yourself on one of the many currency trades we have available. It’s great to have variety with a Bollinger Band strategy, and we provide variety for your strategy.

Great platforms at your disposal

At, we provide the top class software so we adapt ourselves to your trading methods. For Bollinger Bands, we don’t even need to adapt – all our software works seamlessly with great momentum trading strategies like Bollinger Band. Whether you want to use the MetaTrader 5 (MT5), or the CAPEX Web Trader, our Trading platforms will suit your Bollinger Band strategy and fit like a glove.

When you go onto our trading software, we give you full flexibility over your Bollinger Band strategy. You control the length of the lines,  the displacement, and where to plot the lower line, midline and upper line. You have all  this control, and simple to see colours with pink for the upper band, yellow for the midband, and sky blue for the lower band. The Bollinger Band strategy, and at, we want to simplify it even further.

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A brief rundown of all the functions in a Bollinger Band strategy

Bollinger Bands are essentially composed of three lines. You’ll need to know everything about these three lines to formulate the best momentum strategy. The upper and lower bands are drawn either side of the middle band; which is the moving average of the Bollinger Band. The distance between the upper and lower bands are determined by a standard deviation. This is the volatility of your chosen instrument. You determine what the standard deviation is, but commonly it’s set to 2. Most set the period time to 20 days too. So, this is what the formula would look like for the upper and lower lines with 20 days and 2 as the figures:

  • Upper line= 20 day SMA (standard moving average) + (20 day standard deviation multiplied by 2)
  • Lower line= 20-day SMA (standard moving average) – (20-day standard deviation multiplied by 2)

You can set your time period to weeks, days, hours or even minutes, depending on your Bollinger Band strategy.

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Opportunities and risks

Opportunities – The upside to using these Bollinger Band strategies

  • Useful indicators: Any Bollinger Band strategy you use is the best possible indicator of any trends going on in the market. It’s easy to locate, and determine any kind of volatility when you use a Bollinger Band strategy, and knowing when volatility will occur will give you a step up when you’re looking to make profit.
  • Easy to learn: A Bollinger Band strategy isn’t as complicated as an Ichimoku strategy, or even a momentum trading strategy. You only have to learn the functions of the three bands – upper, midband and lower – and what it means when your price trend falls above and below them. With that in mind, any trader can make some serious profit on trading platform using our Bollinger Band
  • Trend setter: The Bollinger Band strategy excels in determining when new trends will start, and current trends will end. This is invaluable knowledge to know if you’re new to the market, and gives you that boost to hop on some instruments that will guarantee you profit.

Risks – The potential downfalls of relying on a Bollinger Band strategy too much

  • Limited as a stand alone: A Bollinger Band strategy has one function – determine volatility and trends so you know when to enter and exit a trade. That is it’s sole purpose, and this can fairly limit your overall perspective on the market by relying on a Bollinger Band strategy on its own. We at recommend you use other indicators with it.
  • False signals: When trends are low, and a market is stable, a Bollinger Band strategy can produce false signals. These signals can be distracting, and annoying, especially if you’re focusing on more stable trades like bonds or indices. Our recommendation is to stick to the volatile trades – Forex, stocks and cryptocurrency.
  • Reliance on market movements: The tendency to follow recent market movements means a Bollinger Band strategy can’t predict upcoming price movements. This means you mightn’t get a price signal until the trend has already begun.

Resources available

We, at, pride ourselves in providing traders the information they need to learn about whatever strategy or instrument they want to use. And, with the Bollinger Band strategy, you’ll find plenty of opportunities to learn. Want a clearer idea of how to master a Bollinger Band strategy? Go to our Trading Academy, and start learning at your own pace. Maybe, you’d like to get a better idea of the market first, before plunging into your trading? Check out our market news page, and get all the need to know news.


What is so great about a Bollinger Band Strategy?

  • Determines valuable assets: Using a Bollinger Band strategy can be useful to determine and locate overbought and oversold assets. These are assets that have traded so much, they have reached a low value, but have potential for a price bounce.
  • Simple: Bollinger Band strategies are so popular, because a Bollinger Band is simple to use. If you’re a novice trader, it doesn’t matter – you can get a grasp on a Bollinger Band strategy relatively quickly on our platform.
  • Volatility: A Bollinger Band strategy is often used to break down a trades volatility, and how prone it is to rapid trends due to market changes. Bollinger Band strategies also present this information in the most clear way possible for traders regardless of their experience level.

How do I know when to enter or leave a trade?

There’s many different ways to determine a position’s value. In most cases, you want to enter a trade when it is oversold, and exit when it is overbought. Moving averages are the best indicator you can use for a Bollinger Band strategy. A moving average determines the average price of a trade over a specific time frame. You have flexibility of the time period on our trading platform. The basic rule for a moving average is that if the price is above the moving average, the trade is up. And, vice versa.

You can also use an ATR (Average true range), which determines a trades volatility. Often used with commodities, it is useful in identifying entry and exit points. A high ATR means high volatility, and a low ATR means lower volatility.  It’s a useful tool for a Bollinger Band strategy when used with other indicators.

Double bottoms – Using the Double Bottoms Bollinger Band strategy

The double bottom Bollinger Band technique is an effective technique for a volatile market. This is when you allow the trade to sharply fall below the bottom Bollinger Band. Eventually, the trade will bounce back to the middle band, indicating a high price, before falling back down onto the lower band, and closing there.

This is a long strategy to use, as the double bottom usually indicates a sharp rise in the trade, bouncing up to the middle and the top bands. When studying the double bottom, it’s a game of patience. If you’re too impulsive, and close your position too quickly, you could lose a serious potential for profit. You have to let the double bottom run its course, and when it finishes, you’ll take full advantage of this Bollinger Band strategy. On, it’ll be simple to spot a double bottom on our flexible trading platform, which you can even test in the demo trading platform.


Reversals – Looking for reversals with the Reversal Bollinger Band strategy

In the reversal Bollinger Band strategy, the trader looks for any potential sign of a reversal of a current price trend. It’s a technique that requires a great knowledge of the trade you’re entering, and of the instrument’s volatility too. For example, you decide to enter a EUR/USD position

You may see during your Bollinger Band strategy that the price may rise above the upper band, but rapidly close below the lower band. This may indicate that the price will eventually rise above the upper Bollinger Band again. You’re aiming for the middle band being the optimal position to exit the trade, and make a profit. The great thing about the reversal Bollinger Band strategy is that you have the flexibility to take a long or short position. As long as you follow our Bollinger Band, and close the position at the right time, it does not matter.




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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 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, 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 now, and try out your Bollinger Band strategy!

Bollinger Band Strategy – FAQ

🤔 How do you use Bollinger Band Strategy effectively?
🤷 What happens when Bollinger Band widens?
👀What is a moving average strategy?