Bollinger Band squeeze
A Bollinger Band squeeze is a period when the bands are unusually narrow, meaning recent volatility is low. A squeeze rule waits for it and then trades the break out of the range.
How Bollinger Band squeeze is calculated
Bandwidth = (upper band - lower band) / middle band. A squeeze is bandwidth at or near its lowest level over a long window, for example the lowest in 6 months. The rule then needs a trigger, such as a close above the upper band or above a recent high.
How it is read
Volatility tends to come in clusters, so calm periods are followed by calm or by large moves. A narrow band says volatility is low now. It does not say which way the next move goes or when.
Common mistakes
- Picking a direction in advance. The squeeze carries no direction.
- Defining the squeeze by eye. Write the threshold down before looking at the chart.
- Counting only the squeezes that led to big moves.
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.