The bottlenecking phenomenon is more noticeable due to its high applicability and effectiveness for traders. When the upper and lower bands move closer together, making the Bollinger Bands narrow to look like a bottleneck, it is a warning sign that there will be a strong price movement in the near future after a period of sideways accumulation. bottleneck. Usually, after the bottle is released, the price will report to the upper or lower boundary and continue.


A simple strategy for BBs bottlenecks is to place a Buy stop and Sell stop at the upper and lower bands of the BB. When the price starts to inflate, regardless of direction will match your order.

HOW TO TRADE EFFICIENCY SHOOTING BUTTON?

The above is just a simple strategy for BBs traders. However, it takes technique and focuses on entry points for good results.

We should enter as soon as the price breaks out of the bottleneck and starts moving.


As shown above, the sideways price is in the bottleneck and forms candle number 1. You can enter an order when a candle hits the upper or lower boundary of the BBs.

Specifically, the second candle touched the upper boundary of BBs. So when tree 2 is closed, we can enter orders, but the buying power is not very strong because the candle body has not cut to the upper boundary. Therefore, we wait for the next tree to form to see how. Indeed, PK 3 increased sharply and cut to the upper boundary. So I have two options. If you take a little risk, place a Buy order as soon as PK 2 closes. The second option is to place a buy order when the third tree rises to cross the border on the BBs (no need to wait for closing).

Choose the first option, enter a Buy order at 1.36194 and place the stop loss below the tail of the second candle. Do you see that my stop loss is short? That's why bottleneck trading gives us a very good R: R ratio.

Now we will go to another example. This time the bottleneck will be longer, the price will sideways for longer.


This time candle number 1 hits the upper boundary. According to the above example, we will enter the Buy order, then the order will lose. But the stop loss is short, the loss is not much. Holes are like filtered water, it's a part of life. We should be happy to accept. The first setup lost 12 pips.

Continue to follow up to find opportunities. The third candle formed and swept our stop loss, however it gave us another chance. PK 3 has hit the lower boundary of BBs. We'll place a Sell order. The number 3 is a long candle, so the stop loss is only half of the candle (9 pips). Take profit 5 times the stop loss). R: R ratio would be 5: 1. Eat 45 pips, lose 12 pips, net eat 33 pips without commission.

Continue through the second bottleneck. In this case, candle number 4 is the first tree to touch BBs. We do not enter orders. The reason is simple: it has run out of force to its neck, there's nothing left for us to eat. In fact, it has reduced a few more trees, but it does not meet the ratio of R: R, it's best not to enter to avoid losses.

CONCLUSION FOR THIS METHOD

Trading with this method is that you have to wait patiently and continuously watch when there is a bottleneck phenomenon. Avoid situations like candle number 4.

BBs bottleneck trading is not the holy grail method. Therefore, traders need to have appropriate risk management and capital management strategies.