How to trade with Bollinger Bands?

1. Reversals
Fading stocks when they start printing outside of the bands is a simple but effective trading strategy. We’ll take it a step further and incorporate some candlestick analysis into this strategy

For example, rather than shorting a stock as it approaches its upper band limit, wait to see how it performs. If the stock goes parabolic or gaps up and then closes near its low while trading near the outside of the bands, it is often a good indicator that the stock will correct in the near term

Then, depending on where the stock finds support, you can enter a short position with three target exit areas:
(1) The upper band
(2) The middle band
(3) The lower band

2. Double Bottoms

A double-bottom setup is a common Bollinger Band strategy
This formation ’s first bottom is characterized by high volume and a sharp price pullback that closes outside of the lower Bollinger Band. These kinds of moves usually result in what is known as an “automatic rally.” The automatic rally’s high usually serves as the first level of resistance in the base-building process before the stock moves higher

3. Riding the Bands
Many Bollinger Band newcomers make the same mistake: they sell when the price reaches the upper band and buy when it reaches the lower band. According to Bollinger, a touch of the upper or lower band does not constitute a buy or sell signal

Look at the example below and notice how the bands tighten just before the breakout. To return to an earlier point, price penetration of the bands cannot be used to justify shorting or selling a stock