Bollinger Band Stops

Bollinger Band stops are a risk management technique that uses the outer bands of a Bollinger Band indicator to define stop loss levels. Since the bands expand and contract based on volatility, this method provides a dynamic stop loss that adjusts to market conditions.

When volatility is high, the bands widen, giving the trade more room to breathe; when volatility is low, the bands tighten, protecting against sudden moves. This strategy is particularly effective for trend-following traders who want to stay in a position as long as the trend remains intact.

It combines volatility-based sizing with technical trend analysis. Traders often set their stops just outside the bands to avoid being stopped out by minor fluctuations.

It is a systematic way to manage risk without relying on fixed price levels.