The Bollinger Squeeze (TBS) Strategy

Hello everyone, it gives me great pleasure to introduce The Bollinger Squeeze Strategy (TBS) to you.

I have seen some of the indicators we are going to use for this strategy used in other places for trading. However, this is a comprehensive package, which could be a good tool when it comes to profitable financial market trading.
This Strategy is derived from the knowledge of three indicators. Bollinger band, Bollinger Bandwidth and the Stochastic oscillator. The three indicators must all confirm our trade signal. So to have a valid signal, three conditions must be met.

Condtion 1: Touching Upper/Lower Bollinger Band
When prices reaches a high level they will touch the upper band. When prices reaches lower levels, they will touch the lower band. So to have a valid trade, prices must touch either the upper or lower band.



Condition 2: Bollinger Bandwidth measured by the Bandwidth Indicator
The bandwidth is the difference (gap) between the upper band and the lower band.
This Bandwidth indicator takes the current Width of the Bollinger Bands and compares it to the Maximum and Minimum Width of the Bands over N periods
If the calculated percentage is less than or equal to X Percent (which we will specify), then the histogram shows yellow. If the calculated percentage is greater than the X Percent, then the histogram shows Red.
This works out well to quickly see if the currency pair is ranging (Yellow) and if it has broken out of range (Red)
To have a valid trade, the bandwidth indicator must be Yellow which means prices are contained within a tight range. This give us the opportunity to be able to trade inside the band picking top and bottom of the range with the help of the Stochastic indicator.



Condition 3: Stochastic Oscillator
Stochastic indicator usually has two horizontal lines, one at 20 and one at 80. The 20 line is called the oversold level and the 80 line is referred to as overbought level. To have a valid BUY signal, stochastic must have been in the oversold territory and crossing the 20 line upward. To have a valid SELL signal, Stochastic must have been in the overbought territory and crossing the 80 line downward.



Putting it together For a BUY Signal
Once price has touch the lower band, you will check the Bandwidth indicator. The Bandwidth indicator must shows that the price is in a range (Yellow Colour), You will then wait for Stochastic to confirm the trade. Stochastic indicator will have to cross the 20 line upward from the oversold territory.

Putting it together For a SELL Signal
Once prices has touch the upper band, you will check the Bandwidth indicator. The Bandwidth indicator must shows that the price is in a range (Yellow Colour), You will then wait for Stochastic to confirm the trade. Stochastic indicator will have to cross the 80 line downward from the overbought territory.



In Summarry


The three indicators required are Bollinger Band (Included in Metatrader), Bollinger Bandwith (custom indicator, attached), and Stochastic Oscillator (Included in Metatrader). Here are the settings:

Bollinger Band
Period – 20 , Shift – 0, Deviation – 2, Set to ‘close’

Bollinger Bandwidth
Period – 20 , Shift – 0, Deviation – 2, Width Calculation Period – 100
Min Range Percent – 20

Stochastic
%K period - 9, find it below:
%D period - 3
Slowing - 3
Price field - Low/High
MA method - simple

The Bandwidth indicator and the template attached.





If you will like to see a video explanation of the strategy, here it is:


And finally, an example of a trade taken using this strategy, here it is:


You can ask any question or comments either here in this forum or on the YouTube page.
Happy trading.

Am I missing something? Some of the bars in your examples are "green"....but you mention only yellow and red bars....i'm assuming that they actually Yellow....?

is the BBbandwith repainting?

The BBWidth indicator does not repaint

Interesting method, which time frames have you tried

i really appreciate your gesture for putting the BB idea together in this simple and workable form, for possible profit making
i will like guyz to post screenshot images and result of trades done using this idea , so that many other people can buy into the idea and makes green pips at the end of the day

Hi makemo8,
Do you use this system on a real account ?
What profit did you make with this one-year system for example ?

Best regards,

Many times the entrance candle is already at the BB mid-band.
I think you need another way to take profit.

You are quite right. That is where traders discretion comes in to play. If the price already approaching the middle band when the signal is generated, then it is a good idea to pass on that signal even though you can still make some profits. However when the risk/reward ratio looks good, you can take the trade.

It works well on all timeframe. Daily is very good, 1hr is also good. The example shown in the video is a 1hr EURUSD trade.

Thanks for sharing your system. Where do you set your Stop Loss?

Few more questions:

1) Do you wait for the candle close before taking the trade?
2) What to do when the first condition happens, 2nd condition happens...but 3rd has not happened yet...and when the 3rd condition happens...the 1st of 2nd condition does not apply anymore...do you still take the trade?
3) What is the risk-reward ratio? I am very much interested his. Is this fixed or each trade is different?
4) What is your percentage winners as compared to losers?

For a SELL position: Stop loss should be placed at the last swing high or the last known resistance level.
For a BUY position: Stop loss should be placed at the last swing low or the last known support level

Attached example shows SL and TP lines.

1) Do you wait for the candle close before taking the trade? YES, because any of the conditions may be true at the beginning of the candle but becomes false before the candle closes. So you must always wait till the close of the candle.

2) What to do when the first condition happens, 2nd condition happens...but 3rd has not happened yet...and when the 3rd condition happens...the 1st of 2nd condition does not apply anymore...do you still take the trade?. Very good question. The 3rd condition (Stochastic) is the trigger. At the time when condition 3 is true, the Bandwidth indicator (condition 2) must still be true. However, the price has already touched the Bollinger band once (condition 1) and that is enough even though the price is no longer touching Bollinger when conditions 2 and 3 are true. Hope that is clear.

3) What is the risk-reward ratio? I am very much interested his. Is this fixed or each trade is different? Risk/reward is not fixed especially if you take half of your position off the table at the middle Bollinger and the rest half at the opposite Bollinger band. Remember to move your SL to break even after you close half of you position at the middle band.

4) What is your percentage winners as compared to losers? I will suggest an average of 70/30.

Guys.
Yes.
this is time for profitable trend trading.
please keep that in mind : it won't last forever. when market stops trending swith to another strategy.
im not telling this strategy is bad or sth but it should be used when there is time for it.

You've got it in reverse. You don't want trending with this strategy. You want it to range.

You got it spot on. This strategy is meant to SELL at top of a range and BUY at low of range.
In the near future, I could add the sister strategy which does what billbss is refering to (trending strategy) But this particular strategy is for a ranging market.

thank you so much makemo8 , for sharing this strategy/system ......

hi makemo8
thanks for sharing im subscribed

gl.