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Bollinger Band Squeeze & Breakout

Setup & Indicator

  • Bollinger Bands: Period 20, StdDev 2
  • Timeframe: M30–H1 for more frequent squeezes
  • Volume Filter: Low ATR² value or VIX-like index

Entry

  1. Identify the squeeze: Bands move close together (bandwidth < 0.5 × average).
  2. Breakout: Price closes outside the upper band → Long, or outside the lower band → Short.

Exit & Trailing

  • Stop-Loss: At the middle band (MA20) or a few pips back inside the band.
  • Trailing: Fixed distance (e.g. 20–30 pips) or adaptive along the upper/lower band line.

Risk Management

  • Open positions only if volume (MT5 volume histogram) increases.
  • No trading during high-impact news (news filter in EA).

 

Example chart: Bollinger Band Squeeze & Breakout
Example chart for the Bollinger Band Squeeze & Breakout setup

 

Here is an example chart of the Bollinger Band Squeeze & Breakout setup:

  • Upper panel (Price with Bollinger Bands):
    • Yellow line: Closing price
    • Dotted lines: Upper and lower bands (BB20,2)
    • Red line: Middle band (MA20)
    • ▲ Long breakout: Close after a squeeze above the upper band
    • ▼ Short breakout: Close after a squeeze below the lower band
  • Lower panel (Bandwidth):
    • Yellow line: Bandwidth = (Upper – Lower Band) / MA20
    • Dashed line: Squeeze threshold = 0.5 × average bandwidth

Explanation

  1. Squeeze phase: When bandwidth falls below the threshold, it indicates low volatility.
  2. Breakout: After a squeeze, if the price closes outside the bands, a long (upper) or short (lower) trade is generated.
  3. Volume filter & news: In practice, ensure volume (e.g. MT5 volume histogram) increases and no high-impact news is scheduled before entering a trade.
  4. Stop-Loss & Trailing: Stop near the middle band or a few pips back; trailing stop fixed (20–30 pips) or dynamically along the band.

This chart provides a visual template of how squeeze phases and subsequent breakouts appear in the M30–H1 context.