When the Bollinger Bands pinch in, the market is coiling. Your job is to wait for a confirmed break, not to front-run it.
The core setup
The squeeze plays when EUR/USD on M5 compresses and the upper and lower bands draw together. Only when price breaks out on a clean candle is there anything to trade.
How to enter
BUY when a candle closes above the upper band and the MACD histogram turns positive. SELL when a candle closes below the lower band and the histogram turns negative. A wick through the band that pulls back is not a break.
Managing the trade
The stop can sit around the Bollinger middle band, usually the equivalent of 12-15 pips depending on volatility. A target of 1.5R to 2R is plenty; no need to reach on a scalp.
When to skip it
Skip it within an hour of NFP, CPI, FOMC or other high-impact news. The bands can blow wide open, but the slippage and spread get just as ugly.
This one suits traders who can sit on their hands and wait for clean conditions. To use it well, train your eye to tell a real breakout from a fake sweep.
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Publishing note: This content is not investment advice. Always test on demo and take responsibility for your own risk management.