Bollinger Bands are a 20-period moving average with an upper and lower band, usually two standard deviations away. The bands widen when volatility rises and narrow when it falls.
1. The squeeze
When the bands narrow to their tightest in a while, volatility is compressed. A strong move often follows. Trade the direction of the breakout from the squeeze, ideally in line with the higher-timeframe trend.
2. The band walk
In strong trends, price can 'walk' along the upper (or lower) band for many candles. Touching the upper band in an uptrend is a sign of strength, not an automatic sell signal.
3. Outside-band reversal
In a range, a candle closing outside a band followed by a candle closing back inside can signal a move back to the middle band. This is a mean-reversion trade: stop beyond the extreme, target the middle band.