Bollinger Band Squeeze Breakout

Entry Logic

• Exact Entry Trigger: Enter long on a candle close above the upper Bollinger Band after a period of low volatility (narrow bands). Enter short on a candle close below the lower band.
• Confirmation: High volume on the breakout candle.
• Timeframe: 60-minute, Daily.
• Market Condition: Transition from low to high volatility.

Exit Logic

• Profit Targets: Target a 2 ATR move from the entry price.
• Trailing Stop: Trail the stop using the 20-period simple moving average (the middle band).

Stop Loss Structure

• Hard Stop: Place stop at the midpoint of the Bollinger Bands at the time of entry.

Risk Management Framework

• Risk Per Trade: 1% of account capital.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Volatility-based sizing.

Trade Filtering

• Market Conditions to Avoid: Wide, trending bands (already high volatility).

Context Framework

• Trend Direction: The breakout determines the direction.

Trade Management Rules

• Fast Moves: Be prepared for a rapid expansion in price and volatility.

Time Rules

• Optimal Window: Any time, but often occurs leading into a major catalyst.

Setup Classification

• A+ Setup: The squeeze has lasted for an extended period (e.g., TTM Squeeze indicator fires).

Market Selection Criteria

• Instruments: Stocks known for explosive moves.

Statistical Edge Metrics

• Win Rate: 40-50%.
• Profit Factor: 2.2.
• Expectancy: 0.6R.

Failure Conditions

• Strategy Fails: On false breakouts (head fakes).

Psychological Rules

• Discipline: Act decisively on the breakout, as hesitation can lead to a missed entry.

Advanced Components

• Filters: Use the Bollinger Band Width indicator to quantify the squeeze.

Location

• Strongest: After a prolonged period of consolidation.