What Is Bollinger Squeeze?
The Bollinger Squeeze occurs when Bollinger Bands contract to their narrowest width in a given period, indicating that volatility has compressed to extreme lows. Since low volatility regimes tend to be followed by high volatility, the squeeze signals that a significant price move is imminent — though not which direction.
How Bollinger Squeeze Works
The squeeze is often measured using Bandwidth: (Upper Band - Lower Band) / Middle Band. When Bandwidth reaches a multi-week or multi-month low, the squeeze is active. Adding Keltner Channels provides direction clues: when Bollinger Bands are inside Keltner Channels, it confirms the squeeze. The direction of the breakout (above upper band or below lower band) then signals the trade.
Why It Matters for Traders
Bollinger Squeezes are among the most reliable setups for crypto swing traders because volatility in crypto is cyclical — periods of compression always lead to expansion. The key is patience: enter on the breakout with volume confirmation rather than trying to predict the direction. A squeeze that resolves upward on above-average volume is a high-probability long entry; downward on volume is a short entry.
