Bollinger Band SqueezeWhat is a Bollinger Band Squeeze?
• A Bollinger Band Squeeze describes a period in which volatility is extremely low. The narrowing of the Bollinger Bands signals low volatility.
• There is a formula to calculate the level of the squeeze. However, for simplicity, I use the Bollinger BandWidth with High/Low References by Sinier, with a 180-day lookback period.
• You can look at the bottom indicator and see that the orange line, signifying the BB width is as low as it gets.
• According to Bollinger, periods of low volatility are often followed by periods of high volatility. It stands to reason that once the period of low volatility is over, a big move, up or down, will happen.
• For example, In may BNB was squeezed in a 3.41% range, and the following move was a 25% move.
How to determine the direction of the squeeze?
• The squeeze by itself, is a directionless signal.
• Bollinger suggests using momentum indicators, volume-based indicators, divergences, and classical TA techniques to determine the direction of the squeeze.
• Bollinger also suggests practical advice, based on market psychology: when the majority of traders point in the same direction, it’s usually a good idea to go in the opposite direction.
Trade idea:
• I couldn’t get a directional hint by using indicators. However, since we are in a range with clearly defined support and resistance levels, I will take this trade as a breakout trade.
• Support is 235 USDT. Resistance is 250USDT.
• You can take this trade at the break of the Bollinger band, to either side. Or, you can be more conservative and wait for a support resistance flip.
• The SL is the upper or lower boundary of the Bollinger band.
