Bollinger Bands


Basic Bollinger Band Trading Strategies

1. Bollinger Band Bounce (Reversal Strategy)

👉 Best for: Range-bound markets
📌 How to Trade:

  • Buy when price touches the Lower Band and shows a reversal candlestick (e.g., Hammer)
  • Sell when price touches the Upper Band and shows a reversal candlestick (e.g., Shooting Star)
    🎯 Target: Middle Band or opposite Band
    🛑 Stop Loss: Below/above the recent low/high

Example: If a stock is trading sideways and touches the Lower Band, expect a bounce upward.

2. Bollinger Band Squeeze (Breakout Strategy)

👉 Best for: Identifying strong breakouts
📌 How to Trade:

  • When bands contract (squeeze), it signals low volatility
  • Wait for a breakout (price moving outside the bands)
  • Trade in the direction of the breakout

🎯 Target: Move equal to the previous range
🛑 Stop Loss: Below/above breakout candle

Example: If a stock consolidates within narrow bands and then breaks above, it signals an uptrend.

3. Bollinger Band Riding (Trend-Following Strategy)

👉 Best for: Strong trending markets
📌 How to Trade:

  • In an uptrend, price moves along the Upper Band
  • In a downtrend, price moves along the Lower Band
  • Use moving averages (SMA/EMA) for confirmation

🎯 Target: Trail stop-loss with EMA or Middle Band
🛑 Stop Loss: Below Middle Band for uptrend, above for downtrend

Example: In a strong uptrend, buying when the price touches the Middle Band can be profitable.


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