# Bollinger Band squeeze: a strategy to learn and test | DT Academy > When the bands pinch to their narrowest in months, trade the break that follows. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Breakout # Bollinger Band squeeze John Bollinger's observation that quiet spells tend to be followed by busy ones. When the bands (a 20-period average plus and minus 2 standard deviations) narrow to their tightest in about six months, a bigger move often follows. The squeeze gives no direction: you wait for a band break, confirm it on the chart, and watch for a head fake, a first break that reverses. Intermediate Stocks in the source (daily bars); the sources give no guidance for other markets or timeframes Daily bars in the source H4, D1 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fbollinger_squeeze) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fbollinger_squeeze) Example 01 ### Bollinger Band squeeze on a chart US100 · D1 Squeeze pinch, break BandWidth low: 0.10%Upper band at break: 18,230.42Close: 18,330.00Sample candles, not market data The bands pinched to their narrowest in months, then a close broke above resistance and the upper band together. The stop and target were the trader's own choice. ### The rules Setup Bollinger Bands at 20 periods and 2 standard deviations A squeeze: BandWidth near the low of its six-month range (some use the lowest quarter of it) Entry Upside: a break above the upper band, confirmed on the chart (a break of resistance); downside: below the lower band, confirmed by a break of support Or Bollinger's stricter version: a close inside the bands, then a close outside, then price beyond that close on the third day Stop The sources give no stop. Set your own, such as beyond the other band or the other side of the squeeze Target The sources give no target. Set your own; closes outside the bands are first read as continuation Manage If price comes straight back inside the bands, the break has lost its strength ### Common mistakes - Reading the squeeze as a direction. Narrow bands say a move may come, not which way. - Treating a band touch as a signal. Bollinger: tags of the bands are just tags, not signals. - Taking unconfirmed breaks. Those are the ones that turn into head fakes. - Comparing BandWidth across markets. A calm market and a wild one have different normal widths. ### When it's off - A head fake: the break reverses back inside and then breaks the other band - A squeeze alone is not a signal: no break, no trade ### Words to know Breakout Price moves through a support, resistance or range edge and a candle body closes beyond it. A wick beyond that closes back inside is a sweep, not a breakout. False breakout Price breaks beyond a level but cannot stay there and comes back inside, trapping breakout traders. It is only known after the return, never at the breakout candle's close. Bollinger Bands A 20-period average with bands 2 standard deviations above and below it. BandWidth The distance between the bands as a share of the middle line. Head fake A first band break that reverses into a move the other way. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - How exactly do you define narrow: a six-month low, the lowest quarter, or a percentage of price? - What tells you the direction before or at the break? - Do you enter on the touch, the close outside, or the third-day follow-through? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Fbollinger_squeeze) ## From DT Academy - [Why volume matters](https://www.thedtterminal.com/academy/why-volume-matters) - [Backtesting your trades](https://www.thedtterminal.com/academy/backtesting-your-trades) ## What testing exists A study of Bollinger Band signals found them unable to beat buying and holding after costs. It tested band signals in general, not the squeeze. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [Bollinger Band Squeeze (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/bollinger-band-squeeze), StockCharts ChartSchool - [Bollinger BandWidth (opens in a new tab)](https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/bollinger-bandwidth), StockCharts ChartSchool - [Bollinger Band rules (opens in a new tab)](https://www.bollingerbands.com/bollinger-band-rules), John Bollinger, bollingerbands.com - [Bollinger Band Toolkit (Method IV) (opens in a new tab)](https://www.bollingerbands.com/esignal-bbtk), John Bollinger, bollingerbands.com - [How to use Bollinger Bands (opens in a new tab)](https://www.fidelity.com/viewpoints/active-investor/bollinger-bands), Fidelity Viewpoints - [Investment information content in Bollinger Bands? (Applied Financial Economics Letters, 2007) (opens in a new tab)](https://ideas.repec.org/a/taf/raflxx/v3y2007i4p263-267.html), Lento, Gradojevic and Wright - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. 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