Breakout
Bollinger Squeeze Breakout
Catch explosive moves after volatility compresses to an extreme.
Volatility is cyclical: quiet periods precede violent ones. A Bollinger Band 'squeeze', when the bands pinch tight, signals unusually low volatility that often resolves in a strong directional move.
How it works
When band width contracts to a multi-bar low, the market is coiled. The strategy then trades the breakout as price expands out of the squeeze, ideally in the direction of the higher-timeframe trend to avoid false breaks.
Entry rules
- ▸Identify a squeeze: Bollinger band width at a notable low.
- ▸Enter on a close outside the bands in the breakout direction.
- ▸Optionally require trend or volume confirmation to filter false breaks.
Exit & risk
- ▸Stop-loss back inside the bands or below the breakout structure.
- ▸Take profit at a measured target or trail as the bands re-expand.
- ▸Exit if price closes back inside the range (failed breakout).
Best for
Markets that alternate between consolidation and expansion. False breakouts are the main risk, so confirmation and a tight invalidation matter.
Build this strategy in Algovex
Every component of this strategy is a node in Algovex — drop them on the canvas, connect the logic, backtest on a real engine, and export to code. No programming required.
Key terms
Frequently asked questions
What is a Bollinger Band squeeze?
A squeeze is when the bands contract to a narrow width, signalling low volatility that often precedes a strong move. Traders watch for a breakout in either direction once the squeeze releases.