Bollinger Band Trading BREAKOUT EXPLOIT: The Trend Continuation Trick Brokers Don't Want You To Know

Trading with Bollinger Bands for trend continuation involves identifying moments when the market is not reversing, but instead pushing forward with momentum.

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Bollinger Bands consist of a moving average (typically a 20-period SMA) and two standard deviation bands above and below it. In trend continuation setups, traders often look for the price to "ride the band," especially during strong bullish or bearish moves. When price hugs the upper band in an uptrend or the lower band in a downtrend—without retracing sharply—it can signal that momentum is sustaining and the trend is likely to continue.

A key aspect of using Bollinger Bands for continuation trades is recognizing "squeeze and breakout" behavior. When the bands contract tightly (a squeeze), it signals reduced volatility and often precedes a strong move. Once price breaks out of the squeeze, if it closes outside the band and volume increases, this breakout can serve as a powerful continuation signal. Rather than fading the breakout as an overbought/oversold condition, traders look for confirmation of trend strength through candlestick structure, higher highs/lows, or alignment with moving average slopes.

Incorporating other indicators like RSI or MACD can help filter out false continuation signals. For example, in an uptrend, if the price consistently closes near the upper Bollinger Band and RSI stays above 50, it supports the idea of strong bullish momentum. Continuation trades can be entered on pullbacks to the middle band (the moving average), with stop-losses below recent swing lows and targets near the outer band or using trailing stops. This strategy allows traders to stay with the trend and maximize profits as the price continues to expand along the band.

Money Management:
It is important to follow up with this strict rule of investment:
If you have $100 in your account, each open position should be $5 tops
If you have $200 in your account, each open position should be $10 tops
If you have $500 in your account, each open position should be $25 tops
If you have $1,000 in your account, each open position should be $50 tops
If you have $2,000 in your account, each open position should be $100 tops
If you have $5,000 in your account, each open position should be $250 tops

We're currently in our 13th year helping traders become successful in the live markets so we know a thing or two about leveraging a small account into serious wins.

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Risk Disclaimer:
Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.