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The Bollinger Bands Squeeze indicator is a modified version of the Bollinger Bands indicator, which is included in the standard forex set. The indicator can be used in trading to determine the current trend and open positions in its direction. It is displayed directly on the price chart in the form of the same Bollinger Bands, but with more convenient visualization. It has three lines, two borders: upper and lower, and one middle line, which, under certain conditions, is painted in one of three colors. The trading algorithm using the Bollinger Bands Squeeze indicator does not differ from the standard one, that is, trades are opened depending the location of the candle relative to the borders and the middle line of the indicator, as well as the general direction of its lines.
Trading using the Bollinger Bands Squeeze indicator can be carried out on any timeframe, with any currency pairs.
Input parameters
The settings of the Bollinger Bands Squeeze indicator consist of five input parameters, each of which in some way affects both its technical work and its visualization. For example, the Colors section is responsible for its color scheme, and the Levels section is for adding to its signal levels window.
- Bollinger Bands period - the value of the period of the Bollinger Bands indicator. The default value is
- Price - price to which the general calculations of the indicator are applied. By default, it is set to Close price.
- Bollinger Bands deviations multipliers - deviation of the current value of the indicator price from the standard value. The default value is 2.0.
- ATR multiplier - ATR indicator multiplier value. The default value is 1.5.
- Zones percent - percentage value of indicator zones. The default value is 20.
Indicator signals
The Bollinger Bands Squeeze indicator resembles its standard version in terms of usage and general visualization, but this version is more efficient and accurate in signals. To open a certain trade, it is only needed to receive certain conditions. That is, taking into account the current trend and such indicator conditions as the direction of the lines, the color of its middle line, as well as the location of the price relative to this line, a certain trade can be opened.
Signal for Buy trades:
- All three lines of the indicator are moving up. At the same time, the candle should be located above the middle line, which in turn has a color with a growth value and be close to the upper border of the indicator.
Upon receipt of such conditions, a long position can be opened on the signal candle, due to the presence of an upward trend in the market. It should be closed after the opposite conditions are received, namely, when the color of the middle line and the general direction of the indicator change. This will indicate the end or a change in the current trend, which will allow considering opening new trades or simply closing current ones.
Signal for Sell trades:
- The indicator lines are moving down, while the middle line has a color with a falling value. The current candle should close below the middle line and be close to the lower border of the indicator.
Upon receipt of such conditions characterizing a downtrend, a short position may be opened. It should be closed after the middle line of the indicator turns into a different color. This will indicate a change or end of the current trend, which will make it possible to consider opening new or closing old trades.
Conclusion
The Bollinger Bands Squeeze indicator is built on the functioning of the Bollinger Bands indicator, which in turn is very effective, which has been proven by time. This version is more accurate in signals, and therefore serves as a very profitable algorithm in trading. To master the indicator, it is enough to be able to use its standard version, or use a demo account in advance.
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