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AltCoinTrader Technical Analysis: What is the BB squeeze?

A Bollinger Band squeeze otherwise known as a BB squeeze, is a welcome addition to any trader’s bag of trading tricks. Today we show you how to identify the BB squeeze on AltCoinTrader’s charting program to make your trades more profitable.

What is a BB squeeze?

Seasoned traders make use of Bollinger Bands when trading. Created by John Bollinger, these are one of the most useful technical indicators, if applied correctly. Bollinger Bands consist of three lines or bands that indicate market volatility.

A BB squeeze occurs when volatility falls to low levels and the bands narrow. As a general rule of thumb, when Bollinger Bands are far apart, volatility is high. When the bands are close together, volatility is low. John Bollinger believed that periods of low volatility are followed by periods of high volatility. So, when the bands narrow, it is generally an indication that a coin’s price can go up or down.

How to identify a BB squeeze on AltCoinTrader

Identifying a BB squeeze is easy on South Africa’s favourite cryptocurrency exchange, AltCoinTrader. Here is a step-by-step guide how to identify a BB squeeze on AltCoinTrader:

  • Login to your AltCoinTrader account
  • Click on the Indicator icon, next to the Settings icon
  • Select “Bollinger Bands” from the drop-down menu
  • You will notice three bands forming around the candle sticks on the chart. These are the Bollinger Bands.
  • The trick to identify a BB squeeze is to look for opportunities when the two outside bands narrow and come closer to the middle band.
Traders can also measure the Bollinger Band width aka the distance between the Bollinger Bands. Basically, it is the value of the upper band minus the value of the lower band. Ideally, it is a bullish sign if the band width is near the low end.

Determining the BB squeeze direction

Identifying a BB squeeze is relatively straightforward. Simply look for narrowing bands and low band width levels. When this pattern forms, it is not necessarily a sign to buy or sell. Remember, a BB squeeze simply refers to contracting volatility.

In order to determine the BB squeeze direction, traders can use a variety of other trading tools. Here are some of the most popular trading tools on AltCoinTrader:

  • Accumulation Distribution Line
  • Chaikin Money Flow
  • Money Flow Index (MFI)
  • On Balance Volume (OBV)
  • Relative Strength Index (RSI)
Still one of the most effective ways to tell if the price of a coin will go up or down is to wait for it to break resistance or test support. Also, be sure to check trading volume.

Traders must also be on the lookout for the infamous “head fake.” This is when the price breaks a band, suddenly reverses and move the other way. It is similar to a bull and bear trap.

In conclusion, practice makes perfect. The more you trade and practice technical analysis, the better you will get at it.