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Bollinger Breakout System - what is it?

The Bollinger Breakout system uses Bollinger Bands to identify market entry and exit points.

Bollinger Bands are lines drawn at a distance from a price line where the distance is a specified number of standard deviations. The result is an ‘envelope’ above and below the price line (which is typically the closing price).

The idea is that when the price breaks out of the envelope it is likely to indicate a profitable move, so the market would be entered. The trade would be closed, say when the price came back within the envelope.

The width of the envelope from the price line varies according to the standard deviation at that point in time - so in a sense it can be said to be ‘self-adjusting’ according to current conditions.

(The Bollinger Breakout system is one of the systems supplied with Trading Blox software.)


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