Mastering Bollinger Bands: How to Trade Volatility Squeezes, Breakouts & the Bollinger Bounce

Bollinger Bands is a technical analysis tool used by traders to measure the volatility of the market and look at the current price levels versus prior ranges in which prices have traded.

The chart below shows that during times of reduced market fluctuations, the bands narrow and move closer together, while during periods of heightened market volatility, the bands widen and spread further apart.

It may be simpler to look at Bollinger bands as a form of support and resistance.

Bollinger bands show that when the price moves within the band, it usually returns to the middle. This is called the Bollinger Bounce.

Often the bands can be seen to “squeeze” together as seen above.

Many traders see a band squeeze as an indication to a pending breakout in the market. If the graph is seen to move towards the upper band, an upwards trend is usually expected, and vice versa.

It is not an often occurrence to see a Bollinger squeeze.

Step into the world of trading with confidence today. Open a free PU Prime live CFD trading account now to experience real-time market action, or refine your strategies risk-free with our demo account.

Disclaimer

This content is for educational and informational purposes only and should not be considered investment advice, a personal recommendation, or an offer to buy or sell any financial instruments.

This material has been prepared without considering any individual investment objectives, financial situations. Any references to past performance of a financial instrument, index, or investment product are not indicative of future results.

PU Prime makes no representation as to the accuracy or completeness of this content and accepts no liability for any loss or damage arising from reliance on the information provided. Trading involves risk, and you should carefully consider your investment objectives and risk tolerance before making any trading decisions. Never invest more than you can afford to lose.