Crude Oil Bollinger Band

Standard settings of Period 20 and 2 Standard Deviations are recommended by John Bollinger and work well for most situations including crude oil. These settings capture ~95% of price action. Only adjust if you have specific backtested reasons.

No. A band touch is not an automatic signal. You need: 1) Confirmation via reversal candle, 2) Context check - Is market ranging or trending? 3) If trending down strongly (walking lower band), don't buy. Wait for proper setup alignment.

Primary target is the middle band (20 SMA). This is the 'fair value' level price tends to return to. Extended target is the opposite band, but this is more aggressive. Consider scaling: 50% at middle band, trail 50% toward opposite band.

Stop should be 10-20 ticks beyond the band you entered from. For a long at the lower band, stop is below lower band. For a short at the upper band, stop is above upper band. The exact distance depends on your risk management.

Tight bands (narrow bandwidth) indicate low volatility, called a 'squeeze.' This typically precedes a breakout move. Wait for bands to expand and price to break in a direction, then trade that direction. Squeezes are powerful setups.

Walking: Multiple consecutive closes at or beyond band, middle band sloping strongly, pullbacks only reach middle band. Bouncing (range): Brief touches that reverse quickly, middle band relatively flat, price moves between both bands. Check middle band slope as primary indicator.

Bandwidth measures band width as percentage - Low values indicate squeeze (breakout coming). %B shows where price is within bands (0=lower, 0.5=middle, 1=upper, >1 or <0 = outside). Use Bandwidth to identify squeezes, %B to quantify how extreme price is.

Always beneficial for mean reversion trades. Look for: Price at lower band + RSI < 30 or bullish divergence (strong buy). Price at upper band + RSI > 70 or bearish divergence (strong sell). Divergence is particularly powerful confirmation.

Check weekly BB for major context, daily BB for signals. Best trades: Both timeframes at same band zone (both at lower = strong buy). Avoid: Conflicting timeframes (weekly upper, daily lower). Weekly provides filter, daily provides entry timing.

When Bollinger Bands contract inside Keltner Channels, it's a 'squeeze' - extremely low volatility. When BB expands outside KC, the squeeze 'fires.' Trade in direction of the breakout (first strong close beyond band). Use momentum to confirm direction.

Code: Calculate SMA, SD, bands. Signal: Price touches band + reversal pattern. Add filters: RSI (<30/>70), trend (middle band slope), volume, time. Backtest 5+ years with realistic costs. Walk-forward test. Paper trade 1-3 months before live. Platforms: TradingView, NinjaTrader, Python.

Mean reversion: Buy calls at lower band, puts at upper band (30-45 DTE). Squeeze: Buy straddles before breakout (low IV = cheap options). Range: Iron condors with strikes at bands. Match strategy to setup. Exit on reversal or time decay concern.

Pre-EIA: Check for squeeze (bandwidth low). Post-EIA: Trade breakout direction if squeeze fires, OR fade extreme band touch after spike settles. Use wider stops. Wait until 10:45+ for price to stabilize. Squeeze + EIA = Powerful combination.

Three+ consecutive closes beyond band = Exhaustion (strong reversion). Failed band break (reverses immediately) = Trade opposite direction. Double band touch with divergence = Higher probability reversal. Very wide bands = Expect contraction, mean reversion likely.

Standard (20,2) works most times. Intraday: Consider (10,2) for more signals. Position trading: Consider (50,2) for smoother bands. High volatility: May use (20,2.5) for wider bands. Test any changes before implementing. Simple often works best.