Guide · Breakouts & channels
Does Bollinger Squeeze work?
Across 375 stocks, Bollinger Squeeze cut the worst fall on 100%, beat buying and holding on risk-adjusted return on 7% and on raw return on 9%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
Bollinger's own volatility breakout. Wait for the bands to pinch to their narrowest in about 6 months, then buy the first close above the upper band.
- A squeeze is BandWidth (the gap between the bands divided by the middle band) at its lowest of the last 125 days.
- In on a close above the upper band (20-day average + 2 standard deviations) when a squeeze happened in the last 5 days.
- Out on a close below the 20-day average.
Breakouts & channels plays bet that when price escapes the range it has held for weeks, the move that follows tends to run. The family guide
How to use it
- It trades rarely (about 1.8 switches a year), so it suits someone who checks in occasionally, and a single bad call can last months.
- Expect to be wrong more often than right: only 31% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It sits in cash much of the time (holding on about 5% of days), so judge it on risk-adjusted return rather than on matching a rising market.
- It worked best on Real estate (21% beat holding on risk-adjusted return) and worst on Micro caps (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Bollinger Squeeze did best against holding in the 2008 crash (+44% median gap) and worst in the 2020–21 rally (−44%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Bollinger Squeeze | +44% | −16% | +26% | −44% | +19% | −14% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Real estate | 21% | -0.20 |
| Software & devices | 12% | -0.48 |
| Consumer & retail | 12% | -0.44 |
| Healthcare | 11% | -0.32 |
| Industrials & rentals | 11% | -0.18 |
| Media & telecom | 10% | -0.26 |
| Energy & power | 8% | -0.37 |
| Financials | 8% | -0.41 |
| Metals & mining | 4% | -0.49 |
| Industrials & materials | 2% | -0.48 |
| Sectors | 0% | -0.56 |
| Indexes & ETFs | 0% | -0.66 |
| Big tech | 0% | -0.27 |
| Semiconductors | 0% | -0.66 |
| Micro caps | 0% | -0.52 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Bollinger Squeeze holds 27 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.