Bollinger squeezes on short charts: what the compression really signals

[Amanhasnoname]

A Bollinger band squeeze occurs when volatility contracts and the bands narrow. The idea is that low volatility precedes a breakout. On daily charts, the pattern has some support. On one-minute charts, the evidence is thinner.

During quiet periods, bands narrow because the market is quiet, not because a move is imminent. Compression is the normal state during lulls, and the following movement is often just the next scheduled activity period, such as a session open.

What can be extracted is timing information. A squeeze before a session open or a data release may precede a volatility burst. The squeeze itself is not the cause.

Directional prediction is the harder part. The breakout direction is nearly a coin flip unless combined with other information.

For scalpers, a simple use is as a volatility regime indicator: when bands are very narrow, the spread cost is relatively high and targets are less likely to be reached, so trading is less attractive.

Testing the squeeze as an entry signal on tick data with costs usually gives modest results.

What conditions make a squeeze followed by a tradable move, in the log?