Strategy of the Week: Bollinger Bands Breakout

📑 Table of Contents

1. Understanding Bollinger Bands
2. 📉 The Breakout Strategy
3. ⚙️ Setup & Settings
4. ✅ Entry Rules
5. 🛑 Risk Management
6. ❓ FAQ

Understanding Bollinger Bands

Bollinger Bands are a volatility indicator consisting of a central Moving Average (usually 20 SMA) and two outer bands (standard deviations).

• Contraction: Low volatility (the "Squeeze").
• Expansion: High volatility (the "Breakout").

The Breakout Strategy

The strategy focuses on catching the price movement when it breaks out of a consolidation phase.

"Volatility cycles from low to high. We wait for the quiet, then trade the noise."

Setup & Settings

• Timeframe: 1 Minute or 5 Minutes.
• Indicator: Bollinger Bands (Period 20, Deviation 2).
• Expiry Time: 2-3 Candles (e.g., if 1m timeframe, 3m expiry).

Entry Rules

Call Option (Up)

1. The bands are squeezed tight (low volatility).
2. A green candle closes above the upper band.
3. Enter immediately on the next candle open.

Put Option (Down)

1. The bands are squeezed tight.
2. A red candle closes below the lower band.
3. Enter immediately on the next candle open.

Risk Management

• Avoid trading during major news releases.
• If the breakout candle has a huge wick, it might be a false breakout. Wait for confirmation.
• Never invest more than 2-5% of your balance per trade.

❓ FAQ