Bollinger Bands with BandWidth

Again, you can see here how areas of tight BandWidth lead to periods of expansion in this stock.

Could using Bollinger Bands with BandWidth to scan for daily stock charts the night before a trading day help you?

Identifying stocks that are ripe for expansion and day trading opportunities the next day is one way. I'll be going over other ways as well.


Bollinger Bands on stock chart of AMZN


With this next chart, I'd like to demonstrate that the cycling of volatility from contraction to expansion back to contraction occurs on all time frames, not just the daily time frame.

You'll notice on this 10 min. chart of WU below, that when the Bollinger Bands 'squeeze' indicated by BandWidth being at a relative low point, price action volatility really picks up.

It's in these areas, that you will typically find trade setups and chart patterns such as, laterals and triangles.

BB with BandWidth on chart of WU


This indicator also has another interesting characteristic that I'd like to point out. This is not something I ever used in my own trading, but it's something that might give you ideas to work on.

Below is another 10 min. chart. This time I want you to notice how when Bandwidth is at a relative high, price has a strong tendency to move back to the mean (20 sma).

Again, I am referring to the relative width of the Bollinger Bands as indicated by BandWidth, not any particular number on the right-hand scale.

Stock Chart of COP with BB


If you're inexperienced, this indicator may assist in finding low volatility trade setups, but after seeing a few hundred of them you'll start to easily and quickly spot setups without even using it.