What are Bollinger Bands?
John Bollinger’s bands are a 20-period simple moving average with a line two standard deviations above and below it. When price is calm the bands narrow; when it moves fast they widen. A close outside a band means price moved further than usual from its average. The question is whether that’s a stretch that will snap back or the start of a trend.
The rules we tested
Bands (20, 2), stop 2 × ATR(14) from the entry in both versions:
| Reversal (against the band) | Breakout (with the band) | |
|---|---|---|
| Long | A close below the lower band | A close above the upper band |
| Short | A close above the upper band | A close below the lower band |
| Exit | A close back at the middle band | A close back through the middle band |
We also tested the version many traders actually use: buy a close below the lower band only when the daily trend is up (sell the upper band only when it’s down), exiting at the other band.
Results: breakout vs reversal
Average R per trade after fees, slippage and funding, six coins, 2020 – September 2026:
| Version | 15 min | 1 hour | 4 hours | 1 day | Win rate, 4 hours |
|---|---|---|---|---|---|
| Breakout (with the band) | −0.17R | +0.02R | +0.16R | +0.49R | 32.5% |
| Reversal (against the band) | −0.18R | −0.13R | −0.11R | −0.10R | 50.8% |
| Lower-band buy, with the daily trend | −0.18R | −0.10R | −0.08R | +0.18R | 39.7% |
The breakout on every timeframe:
| Chart | Trades | Win rate | Average win | Average loss | Average R a trade | Max drawdown | Longest losing run | Years positive |
|---|---|---|---|---|---|---|---|---|
| 15 min | 52,418 | 26.9% | +1.58R | −0.81R | −0.17R | 8799R | 42 | 0 of 7 |
| 1 hour | 12,909 | 31.9% | +1.61R | −0.72R | +0.02R | 267R | 41 | 4 of 7 |
| 4 hours | 3,141 | 32.5% | +1.91R | −0.69R | +0.16R | 80R | 29 | 7 of 7 |
| 1 day | 503 | 36.6% | +2.52R | −0.68R | +0.49R | 17R | 20 | 5 of 7 |
Breakout per year on 4-hour charts: 2020 +80R · 2021 +143R · 2022 +88R · 2023 +48R · 2024 +62R · 2025 +30R · 2026* +40R.
What the numbers say
- Buying the lower band lost everywhere. It won 50.8% of trades on 4-hour charts, but the average win was +0.74R and the average loss −0.99R. In a strong move, price can ride the band for days: the trades that kept going lost a full R, the ones that snapped back made less than one. It lost in every year on 4-hour charts.
- Adding the trend filter didn’t save it on 1-hour or 4-hour charts. The daily result is positive but on only 45 trades, too few to trust.
- The breakout was positive in all 7 years on 4-hour charts and on all six coins, with a 32.5% win rate. Its edge came from a few big trends, as the chart above shows.
- 15-minute charts lost for both, with costs of about 0.18R a trade.
Crypto rose a lot between 2020 and 2026, so trend-following strategies earned most of their R on longs. A market that falls or goes sideways for years would give a different result. Past results don’t predict future ones.
The rule vs your own judgement
A backtest measures the rule, not the trader. Most people who use Bollinger Bands don’t follow it like a machine: they book part of the profit near a big level, skip a choppy day, or wait for a cleaner candle. That can make the result better or worse than the numbers above. On average it makes it worse: SEBI’s study of Indian F&O traders found that 93% of individual traders lost money over the three years to March 2024.
The way to find out which one you are is to measure it. Log every trade you take with this strategy under one strategy tag in your journal, note when you overrode the rule and why, and after 50 or more trades compare your average R with the rule’s. If your judgement adds R, keep it. If it costs R, follow the rule more closely. Our guide on how to journal trades shows what to record.
How to test it yourself
- Write the rules down exactly as above, or with your own changes.
- Open a chart with Bollinger Bands (20, 2). In Profit Prism’s PPM Chart (included with every plan) it’s in the Indicators list, and Bar Replay lets you step through history one candle at a time without seeing what comes next.
- Take every signal the rules give, including the ones you don’t like, and record entry, stop, exit and R. Our free trading journal template does the maths.
- After 50–100 trades, compare your average R per trade with the table above, then read how to backtest a trading strategy for the mistakes to avoid.
How we tested it
- Markets: BTC, ETH, SOL, XRP, BNB and DOGE USDT perpetual futures (public exchange candles), each from its first candle; trades counted from 1 January 2020 to 30 September 2026.
- Rules: the textbook settings above, chosen before we saw any result and never tuned. One trade at a time per coin; a trade still open on 30 September 2026 isn’t counted.
- Fills: entries at the close of the signal candle. A stop is a stop order: it fills at the stop, or at the open if a candle gaps through it. If one candle touches both the stop and a target, we count the stop.
- Costs on every trade: 0.05% exchange fee and 0.02% slippage on each side, plus the real funding payments while the trade was open.
- Results in R: 1R is the distance from entry to the first stop, so a +2R trade made twice what it risked. This lets BTC at 60,000 and DOGE at 0.20 sit in one table.
- Two periods: 2020–2023 and January 2024 – September 2026, to see whether the result lasted.
The test code is ours and the data is public, so the numbers can be checked. This is crypto data only: we don’t have licensed NSE data, so treat Nifty and stock results as untested.
Frequently asked questions
What is the best Bollinger Bands strategy?
In our six-year crypto test, trading breakouts (buying a close above the upper band, selling a close below the lower band) was positive on 1-hour, 4-hour and daily charts. Buying the lower band and selling the upper band lost on every timeframe.
Does buying the lower Bollinger Band work?
Not in our test. It won about 50.8% of trades on 4-hour charts but lost money, because price often keeps moving along the band and those losses were larger than the wins.
What are the default Bollinger Bands settings?
A 20-period simple moving average with bands two standard deviations above and below. That’s what we tested.
Are Bollinger Bands good for intraday trading?
Both versions lost on 15-minute charts in our test, mainly because fees and slippage were large compared with each trade’s risk.
What is a Bollinger Band squeeze?
A squeeze is when the bands get unusually narrow, meaning volatility is low. Traders watch for a breakout from it. We haven’t tested a squeeze strategy separately here.
See your own numbers
Profit Prism Journal measures every trade in R and shows your win rate, RR, leaks and loss limits — for crypto, forex, stocks and F&O. Try it free for 7 days, no card.
Start the free trialFor education only. Not investment advice. Trading involves substantial risk of loss.