How to Use Bollinger Bands for Volatility Trading

Bollinger Bands are a volatility-based tool that help you identify when a market is quiet (the squeeze) or overextended (touching the bands).

Identify the Squeeze

When the bands contract and become narrow, it signals low volatility. This is often the calm before a massive breakout.

Enter in the direction of the candle that closes OUTSIDE the bands. Use the middle band (20 SMA) as your trailing stop.

In a range-bound market, the outer bands act as dynamic support and resistance. Sell at the top band, buy at the bottom.

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