This setup monitors the width of the Bollinger Bands to detect periods of low volatility. When the bands contract relative to their recent average, it signals a potential volatility expansion is near.
Once a squeeze is identified, the strategy waits for price to break outside the bands. A close above the upper band initiates a long, while a close below the lower band opens a short. The trade is closed if price returns toward the middle of the bands or if a stop-loss is triggered.
The method targets traders who like to trade volatility breakouts rather than trend continuation. Using the band width as a filter helps avoid false signals during choppy conditions.
Entry Criteria:
Long: Band width < average width && Close > upper band
Short: Band width < average width && Close < lower band
[]Long/Short: Both sides.
[]Exit Criteria:
Long: Exit when price drops back inside the bands
Short: Exit when price rises back inside the bands
[]Stops: Yes, typically at 2ATR.
[*]Default Values:
BollingerPeriod = 20
BollingerMultiplier = 2.0m
LookbackPeriod = 20
CandleType = TimeSpan.FromMinutes(5)
[*]Filters:
Category: Breakout
Direction: Both
Indicators: Bollinger Bands
Stops: Yes
Complexity: Intermediate
Timeframe: Intraday
Seasonality: No
Neural networks: No
Divergence: No
Risk Level: Medium