This is because prior to the breakout the sellers were in control instead of the buyers.
The last component used in this day trading strategy is volume. This is a very important component as volume alone can save you from a lot of fake breakouts.
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- Trading with the Bollinger Band Squeeze.
The setup explained in very simple terms would be look for contracted Bollinger Bands with a low reading of Bollinger Band Width. Final thing is the volume increase.
What Are Bollinger Bands?
The trigger is fired when resistance is taken out. Volume is also important when going short.
To increase the odds of success try only taking trades with the trend and preferable the first successful setup in that trend. Like with any other system this strategy will not work all the time and is HIGHLY dependent on the right market conditions. Also, the longer the forex prices stay within the narrow bands the greater the chance of a forex price breakout.
Bollinger Bands ® – Top 6 Trading Strategies
The widening of Bollinger Bands is a sign of a forex price breakout and is known as the Bollinger Bands Bulge. Bollinger Bands that are far apart can serve as a forex trading signal that a forex trend reversal is approaching. In the Bollinger bands forex indicator example below, the forex Bollinger bands get very wide as a result of high forex price volatility on the down swing.
The forex trend reverses as prices reach an extreme level according to statistics and the theory of normal distribution. The "bulge" predicts the change to a forex downtrend. Top Forex Broker Rankings.