How to Day Trade Using Bollinger Bands ® : Price Analyses

How to Day Trade Using Bollinger Bands ®

In this article, we’ll go over how you can day trade using Bollinger Bands. As a popular volatility indicator, Bollinger Bands can help you establish entry and exit points as well as where to set your stop loss.

Bollinger Bands consist of a moving average and two envelopes that closely follow price action. The upper and lower envelopes are two standard deviations of the charted price.

How to Day Trade Using Bollinger Bands: Indicator Settings

The first step in day trading using the Bollinger Bands is adjusting your settings. I recommend that you use the default values provided by your trading software but change the timeframe to 15-minute or 1-minute bars.

Note that looking at broader timescales is also important even for day traders. This is because you want to see a clear upside trend on the daily and weekly candles for a higher chance of success.

In the example below for bitcoin, we’re using 15-minute candles after confirming that an uptrend is in play.

day trading bollinger bands 15 minutes

Keep the following strategies in mind when day trading using Bollinger Bands:

  • Buy when price reaches the bottom band and sell once price reaches the middle line.
  • Buy when the price meets the upper band and sell once it returns to the middle line.
  • When prices consistently break out of the upper band this is a sign of strength.
  • When the price exceeds the upper band, it is overbought and when price exceeds the lower band it is ovesold.

Entering a Position & Setting Stop-Losses and Price Targets

Now that we’ve chosen which security we’re going to trade, now is the time to enter a position and set our profit and stop-loss zones.

One strategy you can incorporate using Bollinger Bands is the average true range (ATR) indicator. The ATR will help you place your stop loss as well as determine your profit exit point. Fortunately, Trading View has a built-in tool to help you do just that.

The green line beneath price is the recommended area for your stop loss that is based on true ranges.

The last setup we want to look at is to determine our profit areas. If you are following a Bollinger Band scalping strategy then you should be aiming for a one percent to three percent profit on each trade you complete.

For profit targets, we’re going to use another indicator by Trading View named ‘Profit Target Area.’ This indicator will show us how aggressive or conservative we can be with our profit zones based on short-term historical performance.

Summary

Day trading using only Bollinger Bands is an incomplete strategy. Additional indicators such as the RSI and MACD should also be used along with other volatility tools such as the average true range (ATR).

When these indicators are combined, you are left with a cohesive game plan that can help you set entry and exit points a well as to calculate your stop loss and take-profit zones.

Matthew North

I have a passion for trading, behavioral finance, technology, travel, and writing. Contact: matthew@priceanalyses.com.

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