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Calculated Shard: 148 (from laksa053)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/trading/07/bollinger.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/articles/trading/07/bollinger.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp","crawl_time":1775970637,"first_indexed_time":1510429239,"http_code":200,"src_unparsed":"com,investopedia!www,\/articles\/trading\/07\/bollinger.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"Tales from the Trenches: A Simple Bollinger Band Strategy","meta_descriptions":["Use a simple Bollinger Band strategy to spot extreme short-term price drops and profit on the rebound."],"attrs_boilerpipe_text":"Bollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis.\n1\nBollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security.\nThe Strategy\nMost technicians will use\nBollinger Bands\nwith other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a\nclose\nbelow the lower band, which is then used as an immediate signal to buy the stock the next day.\nBelow is an example of how this strategy works under ideal conditions.\nImage by Sabrina Jiang © Investopedia 2020 \nFigure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory.\nOur simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when\ntraders\nwould enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for.\nWhile the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from.\nAnother example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006.\nImage by Sabrina Jiang © Investopedia 2020 \nNYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month.\nThis is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround.\nIn a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day.\nImage by Sabrina Jiang © Investopedia 2020 \nJust like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band.\nRiding the Band Downward\nAs we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned.\nWhen the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not\nrebound\nas quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the\ncorrection\n.\nFor example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done.\nImage by Sabrina Jiang © Investopedia 2020\nIn a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006.\nImage by Sabrina Jiang © Investopedia 2020\nThe strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an\nintraday\nlow of $76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term\ndrawdown\nof 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the\nselloff\nthere was no way to know when it would end.\nWhat We Learned\nThe strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band.\nThere are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade.\nBoth Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use\nstop-loss orders\n. In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked.\nThe Bottom Line\nBuying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good\nexit strategy\nis in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - [Economy](https:\/\/www.investopedia.com\/economic-news-5218422)\n  - 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[Best Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5094943)\n  - [Best Robo-Advisors](https:\/\/www.investopedia.com\/the-best-robo-advisors-8764849)\n  - [Best Personal Loans](https:\/\/www.investopedia.com\/the-best-personal-loans-8761582)\n  - [Best Debt Relief Companies](https:\/\/www.investopedia.com\/the-best-debt-relief-companies-8763179)\n  - [View All](https:\/\/www.investopedia.com\/financial-product-reviews-7110783)\n\n- Top Stories\n- [This Social Security Mistake Could Cost Your Spouse for Years](https:\/\/www.investopedia.com\/a-common-social-security-mistake-could-cost-your-spouse-for-years-11947182)\n- [Gen Z Admits Faking Finances to Impress Partners](https:\/\/www.investopedia.com\/gen-zers-admit-faking-their-finances-to-impress-partners-and-risk-falling-into-debt-11947157)\n- [Are You Spending More Than Average in Your 50s?](https:\/\/www.investopedia.com\/are-you-spending-more-than-average-in-your-50s-here-s-the-benchmark-11946973)\n- [Warren Buffett's Investing Rule That Could Change Your Future](https:\/\/www.investopedia.com\/warren-buffett-s-investing-rule-that-could-change-your-financial-future-11947169)\n\nTable of Contents\n\nExpand\n\nTable of Contents\n\n- [The Strategy](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp#toc-the-strategy)\n- [Riding the Band Downward](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp#toc-riding-the-band-downward)\n- [What We Learned](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp#toc-what-we-learned)\n- [The Bottom Line](https:\/\/www.investopedia.com\/articles\/trading\/07\/bollinger.asp#toc-the-bottom-line)\n\n# Tales from the Trenches: A Simple Bollinger Band Strategy\nBy\n\n[John Devcic](https:\/\/www.investopedia.com\/contributors\/167\/)\n\n[Full Bio](https:\/\/www.investopedia.com\/contributors\/167\/)\n\nJohn Devcic is a self-educated investor who began experimenting in the market as a teen and whose topics include trading strategies and charting methods.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\nUpdated April 12, 2024\n\nReviewed by\n\n[Samantha Silberstein](https:\/\/www.investopedia.com\/samantha-silberstein-5115118)\n\n![Sam Silberstein]()\n\n![Sam Silberstein](https:\/\/www.investopedia.com\/thmb\/Qsd1ISirwYHu9DMn0zIRjorVz9g=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/00100lrPORTRAIT_00100_BURST20200515171729630_COVER-SamSilberstein-8e793dbafa8845ebb749a0275c34bdef.JPG)\n\nReviewed by Samantha Silberstein\n\n[Full Bio](https:\/\/www.investopedia.com\/samantha-silberstein-5115118)\n\nSamantha (Sam) Silberstein, CFP®, CSLP®, EA, is an experienced financial consultant. She has a demonstrated history of working in both institutional and retail environments, from broker-dealers to RIAs. She is a current CFA level 3 candidate and also has her FINRA Series 7 and 63 licenses. Throughout her career, Samantha has used her expertise and various licenses and certifications to provide in-depth advice about household and business-specific financial planning, investing, credit cards, debt, student loans, taxes, retirement, and income strategies.\n\nLearn about our  [Financial Review Board](https:\/\/www.investopedia.com\/investopedia-financial-review-board-5076269)\n\nFact checked by\n\n[Yarilet Perez](https:\/\/www.investopedia.com\/yarilet-perez-5078533)\n\n![Yarilet Perez]()\n\n![Yarilet Perez](https:\/\/www.investopedia.com\/thmb\/cEF2qOX7iOQUm6i7wsIW7l6w0qo=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/YariletPerez-d2289cb01c3c4f2aabf79ce6057e5078.jpg)\n\nFact checked by Yarilet Perez\n\n[Full Bio](https:\/\/www.investopedia.com\/yarilet-perez-5078533)\n\nYarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\nClose\n\nBollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis.1 Bollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security.\n\n## The Strategy\nMost technicians will use [Bollinger Bands](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp) with other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a [close](https:\/\/www.investopedia.com\/terms\/c\/close.asp) below the lower band, which is then used as an immediate signal to buy the stock the next day.\n\nBelow is an example of how this strategy works under ideal conditions.\n\n![Image](https:\/\/www.investopedia.com\/thmb\/Un8DuYghZi77CvGrwp6yvQPTYOQ=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-01-b500e5fd3faf42e7ad2c7d9c9e2fa070.jpg)\n\n![Image](https:\/\/www.investopedia.com\/thmb\/Un8DuYghZi77CvGrwp6yvQPTYOQ=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-01-b500e5fd3faf42e7ad2c7d9c9e2fa070.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nFigure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory.\n\nOur simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when [traders](https:\/\/www.investopedia.com\/terms\/t\/trader.asp) would enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for.\n\nWhile the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from.\n\nAnother example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006.\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\n![Image](https:\/\/www.investopedia.com\/thmb\/maZxcRoaZiYQ2eIc6cs23TygrTg=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-02-76a5a4c6ebdf4dd3a17307ee0eeed92b.jpg)\n\n![Image](https:\/\/www.investopedia.com\/thmb\/maZxcRoaZiYQ2eIc6cs23TygrTg=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-02-76a5a4c6ebdf4dd3a17307ee0eeed92b.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nNYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month.\n\nThis is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround.\n\nIn a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day.\n\n![Image](https:\/\/www.investopedia.com\/thmb\/XBwbeIrvycsrt2272jL-mY-EIL8=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-03-8655fb24f2594353a8eaea0cf5c4c2c0.jpg)\n\n![Image](https:\/\/www.investopedia.com\/thmb\/XBwbeIrvycsrt2272jL-mY-EIL8=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-03-8655fb24f2594353a8eaea0cf5c4c2c0.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nJust like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band.\n\n## Riding the Band Downward\nAs we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned.\n\nWhen the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not [rebound](https:\/\/www.investopedia.com\/terms\/r\/rebound.asp) as quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the [correction](https:\/\/www.investopedia.com\/terms\/c\/correction.asp).\n\nFor example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done.\n\n![Image](https:\/\/www.investopedia.com\/thmb\/s97VVyDrpZzAnc2t9czBWqI9KBg=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-04-1afaca012d0b4a40839e8f7e742383c5.jpg)\n\n![Image](https:\/\/www.investopedia.com\/thmb\/s97VVyDrpZzAnc2t9czBWqI9KBg=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-04-1afaca012d0b4a40839e8f7e742383c5.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nIn a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006.\n\n![Image](https:\/\/www.investopedia.com\/thmb\/gHWZRili5d_8KK0VmaOly_tn9DU=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-05-b35bf594916a4f459a0d7aab190a26dd.jpg)\n\n![Image](https:\/\/www.investopedia.com\/thmb\/gHWZRili5d_8KK0VmaOly_tn9DU=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-05-b35bf594916a4f459a0d7aab190a26dd.jpg)\n\nImage by Sabrina Jiang © Investopedia 2020\n\nThe strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an [intraday](https:\/\/www.investopedia.com\/terms\/i\/intraday.asp) low of \\$76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term [drawdown](https:\/\/www.investopedia.com\/terms\/d\/drawdown.asp) of 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the [selloff](https:\/\/www.investopedia.com\/terms\/s\/sell-off.asp) there was no way to know when it would end.\n\n## What We Learned\nThe strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band.\n\nThere are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade.\n\nBoth Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use [stop-loss orders](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp). In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked.\n\n## The Bottom Line\nBuying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good [exit strategy](https:\/\/www.investopedia.com\/terms\/e\/exitstrategy.asp) is in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows.\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. Bollinger Bands. \"[Bollinger Bands](https:\/\/www.bollingerbands.com\/).\"\n\nCompare Accounts\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nRead more\n\n- [Trading](https:\/\/www.investopedia.com\/trading-4427765)\n- [Technical Analysis](https:\/\/www.investopedia.com\/technical-analysis-4689657)\n- [Technical Analysis Basic Education](https:\/\/www.investopedia.com\/technical-analysis-basic-education-4689655)\n\nPartner Links\n\n## Related Articles\n[![Photo and illustration composite of two people reviewing an investment portfolio on a tablet. ](https:\/\/www.investopedia.com\/thmb\/fKzQRMTSyllcC5TEESrj-9NFT74=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/SmartBetaExplanationStrategyandExamples_final-d3ef4394038f4a4085191b890421caaa.png) ![Photo and illustration composite of two people reviewing an investment portfolio on a tablet. 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[\\#](https:\/\/www.investopedia.com\/terms-beginning-with-num-4769350)\n- [A](https:\/\/www.investopedia.com\/terms-beginning-with-a-4769351)\n- [B](https:\/\/www.investopedia.com\/terms-beginning-with-b-4769352)\n- [C](https:\/\/www.investopedia.com\/terms-beginning-with-c-4769353)\n- [D](https:\/\/www.investopedia.com\/terms-beginning-with-d-4769354)\n- [E](https:\/\/www.investopedia.com\/terms-beginning-with-e-4769355)\n- [F](https:\/\/www.investopedia.com\/terms-beginning-with-f-4769356)\n- [G](https:\/\/www.investopedia.com\/terms-beginning-with-g-4769357)\n- [H](https:\/\/www.investopedia.com\/terms-beginning-with-h-4769358)\n- [I](https:\/\/www.investopedia.com\/terms-beginning-with-i-4769359)\n- [J](https:\/\/www.investopedia.com\/terms-beginning-with-j-4769360)\n- [K](https:\/\/www.investopedia.com\/terms-beginning-with-k-4769361)\n- [L](https:\/\/www.investopedia.com\/terms-beginning-with-l-4769362)\n- [M](https:\/\/www.investopedia.com\/terms-beginning-with-m-4769363)\n- 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publishing family.\n\nNewsletter Sign Up\n\nNewsletter Sign Up\n\n![]()","attrs_readable_markdown":"Bollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis.1 Bollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security.\n\n## The Strategy\nMost technicians will use [Bollinger Bands](https:\/\/www.investopedia.com\/terms\/b\/bollingerbands.asp) with other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a [close](https:\/\/www.investopedia.com\/terms\/c\/close.asp) below the lower band, which is then used as an immediate signal to buy the stock the next day.\n\nBelow is an example of how this strategy works under ideal conditions.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nFigure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory.\n\nOur simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when [traders](https:\/\/www.investopedia.com\/terms\/t\/trader.asp) would enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for.\n\nWhile the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from.\n\nAnother example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nNYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month.\n\nThis is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround.\n\nIn a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nJust like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band.\n\n## Riding the Band Downward\nAs we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned.\n\nWhen the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not [rebound](https:\/\/www.investopedia.com\/terms\/r\/rebound.asp) as quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the [correction](https:\/\/www.investopedia.com\/terms\/c\/correction.asp).\n\nFor example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nIn a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006.\n\nImage by Sabrina Jiang © Investopedia 2020\n\nThe strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an [intraday](https:\/\/www.investopedia.com\/terms\/i\/intraday.asp) low of \\$76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term [drawdown](https:\/\/www.investopedia.com\/terms\/d\/drawdown.asp) of 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the [selloff](https:\/\/www.investopedia.com\/terms\/s\/sell-off.asp) there was no way to know when it would end.\n\n## What We Learned\nThe strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band.\n\nThere are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade.\n\nBoth Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use [stop-loss orders](https:\/\/www.investopedia.com\/terms\/s\/stop-lossorder.asp). In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked.\n\n## The Bottom Line\nBuying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good [exit strategy](https:\/\/www.investopedia.com\/terms\/e\/exitstrategy.asp) is in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows.","meta_canonical":null}

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Meta Title	Tales from the Trenches: A Simple Bollinger Band Strategy
Meta Description	Use a simple Bollinger Band strategy to spot extreme short-term price drops and profit on the rebound.
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Boilerpipe Text	Bollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis. 1 Bollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security. The Strategy Most technicians will use Bollinger Bands with other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a close below the lower band, which is then used as an immediate signal to buy the stock the next day. Below is an example of how this strategy works under ideal conditions. Image by Sabrina Jiang © Investopedia 2020 Figure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory. Our simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when traders would enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for. While the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from. Another example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006. Image by Sabrina Jiang © Investopedia 2020 NYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month. This is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround. In a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day. Image by Sabrina Jiang © Investopedia 2020 Just like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band. Riding the Band Downward As we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned. When the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not rebound as quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the correction . For example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done. Image by Sabrina Jiang © Investopedia 2020 In a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006. Image by Sabrina Jiang © Investopedia 2020 The strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an intraday low of $76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term drawdown of 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the selloff there was no way to know when it would end. What We Learned The strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band. There are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade. Both Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use stop-loss orders . In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked. The Bottom Line Buying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good exit strategy is in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows.
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[Warren Buffett's Investing Rule That Could Change Your Future](https://www.investopedia.com/warren-buffett-s-investing-rule-that-could-change-your-financial-future-11947169) Table of Contents Expand Table of Contents - [The Strategy](https://www.investopedia.com/articles/trading/07/bollinger.asp#toc-the-strategy) - [Riding the Band Downward](https://www.investopedia.com/articles/trading/07/bollinger.asp#toc-riding-the-band-downward) - [What We Learned](https://www.investopedia.com/articles/trading/07/bollinger.asp#toc-what-we-learned) - [The Bottom Line](https://www.investopedia.com/articles/trading/07/bollinger.asp#toc-the-bottom-line) # Tales from the Trenches: A Simple Bollinger Band Strategy By [John Devcic](https://www.investopedia.com/contributors/167/) [Full Bio](https://www.investopedia.com/contributors/167/) John Devcic is a self-educated investor who began experimenting in the market as a teen and whose topics include trading strategies and charting methods. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated April 12, 2024 Reviewed by [Samantha Silberstein](https://www.investopedia.com/samantha-silberstein-5115118) ![Sam Silberstein]() ![Sam Silberstein](https://www.investopedia.com/thmb/Qsd1ISirwYHu9DMn0zIRjorVz9g=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/00100lrPORTRAIT_00100_BURST20200515171729630_COVER-SamSilberstein-8e793dbafa8845ebb749a0275c34bdef.JPG) Reviewed by Samantha Silberstein [Full Bio](https://www.investopedia.com/samantha-silberstein-5115118) Samantha (Sam) Silberstein, CFP®, CSLP®, EA, is an experienced financial consultant. She has a demonstrated history of working in both institutional and retail environments, from broker-dealers to RIAs. She is a current CFA level 3 candidate and also has her FINRA Series 7 and 63 licenses. Throughout her career, Samantha has used her expertise and various licenses and certifications to provide in-depth advice about household and business-specific financial planning, investing, credit cards, debt, student loans, taxes, retirement, and income strategies. Learn about our [Financial Review Board](https://www.investopedia.com/investopedia-financial-review-board-5076269) Fact checked by [Yarilet Perez](https://www.investopedia.com/yarilet-perez-5078533) ![Yarilet Perez]() ![Yarilet Perez](https://www.investopedia.com/thmb/cEF2qOX7iOQUm6i7wsIW7l6w0qo=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/YariletPerez-d2289cb01c3c4f2aabf79ce6057e5078.jpg) Fact checked by Yarilet Perez [Full Bio](https://www.investopedia.com/yarilet-perez-5078533) Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Close Bollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis.1 Bollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security. ## The Strategy Most technicians will use [Bollinger Bands](https://www.investopedia.com/terms/b/bollingerbands.asp) with other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a [close](https://www.investopedia.com/terms/c/close.asp) below the lower band, which is then used as an immediate signal to buy the stock the next day. Below is an example of how this strategy works under ideal conditions. ![Image](https://www.investopedia.com/thmb/Un8DuYghZi77CvGrwp6yvQPTYOQ=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-01-b500e5fd3faf42e7ad2c7d9c9e2fa070.jpg) ![Image](https://www.investopedia.com/thmb/Un8DuYghZi77CvGrwp6yvQPTYOQ=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-01-b500e5fd3faf42e7ad2c7d9c9e2fa070.jpg) Image by Sabrina Jiang © Investopedia 2020 Figure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory. Our simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when [traders](https://www.investopedia.com/terms/t/trader.asp) would enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for. While the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from. Another example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006. Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. ![Image](https://www.investopedia.com/thmb/maZxcRoaZiYQ2eIc6cs23TygrTg=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-02-76a5a4c6ebdf4dd3a17307ee0eeed92b.jpg) ![Image](https://www.investopedia.com/thmb/maZxcRoaZiYQ2eIc6cs23TygrTg=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-02-76a5a4c6ebdf4dd3a17307ee0eeed92b.jpg) Image by Sabrina Jiang © Investopedia 2020 NYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month. This is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround. In a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day. ![Image](https://www.investopedia.com/thmb/XBwbeIrvycsrt2272jL-mY-EIL8=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-03-8655fb24f2594353a8eaea0cf5c4c2c0.jpg) ![Image](https://www.investopedia.com/thmb/XBwbeIrvycsrt2272jL-mY-EIL8=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-03-8655fb24f2594353a8eaea0cf5c4c2c0.jpg) Image by Sabrina Jiang © Investopedia 2020 Just like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band. ## Riding the Band Downward As we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned. When the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not [rebound](https://www.investopedia.com/terms/r/rebound.asp) as quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the [correction](https://www.investopedia.com/terms/c/correction.asp). For example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done. ![Image](https://www.investopedia.com/thmb/s97VVyDrpZzAnc2t9czBWqI9KBg=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-04-1afaca012d0b4a40839e8f7e742383c5.jpg) ![Image](https://www.investopedia.com/thmb/s97VVyDrpZzAnc2t9czBWqI9KBg=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-04-1afaca012d0b4a40839e8f7e742383c5.jpg) Image by Sabrina Jiang © Investopedia 2020 In a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006. ![Image](https://www.investopedia.com/thmb/gHWZRili5d_8KK0VmaOly_tn9DU=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-05-b35bf594916a4f459a0d7aab190a26dd.jpg) ![Image](https://www.investopedia.com/thmb/gHWZRili5d_8KK0VmaOly_tn9DU=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/dotdash_Final_Tales_from_the_Trenches_A_Simple_Bollinger_Band_Strategy_Jul_2020-05-b35bf594916a4f459a0d7aab190a26dd.jpg) Image by Sabrina Jiang © Investopedia 2020 The strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an [intraday](https://www.investopedia.com/terms/i/intraday.asp) low of \$76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term [drawdown](https://www.investopedia.com/terms/d/drawdown.asp) of 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the [selloff](https://www.investopedia.com/terms/s/sell-off.asp) there was no way to know when it would end. ## What We Learned The strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band. There are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade. Both Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp). In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked. ## The Bottom Line Buying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good [exit strategy](https://www.investopedia.com/terms/e/exitstrategy.asp) is in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Bollinger Bands. "[Bollinger Bands](https://www.bollingerbands.com/)." Compare Accounts Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. 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Readable Markdown	Bollinger Bands were created by John Bollinger in the '80s, and they have quickly become one of the most commonly used tools in technical analysis.1 Bollinger Bands consist of three bands—an upper, middle and lower band—that are used to spotlight extreme short-term prices in a security. The upper band represents overbought territory, while the lower band can show you when a security is oversold. Most technicians will use Bollinger Bands in conjunction with other analysis tools to get a better picture of the current state of a market or security. ## The Strategy Most technicians will use [Bollinger Bands](https://www.investopedia.com/terms/b/bollingerbands.asp) with other indicators, but we wanted to take a look at a simple strategy that uses only the bands to make trading decisions. It has been found that buying the breaks of the lower Bollinger Band is a way to take advantage of oversold conditions. Usually, once a lower band has been broken due to heavy selling, the price of the stock will revert back above the lower band and head toward the middle band. This is the exact scenario this strategy attempts to profit from. The strategy calls for a [close](https://www.investopedia.com/terms/c/close.asp) below the lower band, which is then used as an immediate signal to buy the stock the next day. Below is an example of how this strategy works under ideal conditions. Image by Sabrina Jiang © Investopedia 2020 Figure 1 shows that Intel breaks the lower Bollinger Band and closes below it on Dec. 22. This presented a clear signal that the stock was in oversold territory. Our simple Bollinger Band strategy calls for a close below the lower band followed by an immediate buy the next day. The next trading day was not until Dec. 26, which is the time when [traders](https://www.investopedia.com/terms/t/trader.asp) would enter their positions. This turned out to be an excellent trade. Dec. 26 marked the last time Intel would trade below the lower band. From that day forward, Intel soared all the way past the upper Bollinger Band. This is a textbook example of what the strategy is looking for. While the price move was not major, this example serves to highlight the conditions that the strategy is looking to profit from. Another example of a successful attempt using this strategy is found on the chart of the New York Stock Exchange when it broke the lower Bollinger Band on June 12, 2006. Image by Sabrina Jiang © Investopedia 2020 NYX was clearly in oversold territory. Following the strategy, technical traders would enter their buy orders for NYX on June 13. NYX closed below the lower Bollinger Band for the second day, which may have caused some concern among market participants, but this would be the last time it closed below the lower band for the remainder of the month. This is the ideal scenario that the strategy is looking to capture. In Figure 2, the selling pressure was extreme, and while the Bollinger Bands adjust for this, June 12 marked the heaviest selling. Opening a position on June 13 allowed traders to enter right before the turnaround. In a different example, Yahoo! broke the lower band on Dec. 20, 2006. The strategy called for an immediate buy of the stock the next trading day. Image by Sabrina Jiang © Investopedia 2020 Just like in the previous example, there was still selling pressure on the stock. While everyone else was selling, the strategy calls for a buy. The break of the lower Bollinger Band signaled an oversold condition. That proved correct, as Yahoo soon turned around. On Dec. 26, Yahoo again tested the lower band, but did not close below it. This would be the last time that Yahoo tested the lower band as it marched upward toward the upper band. ## Riding the Band Downward As we all know, every strategy has its drawbacks, and this one is definitely no exception. In the following examples, we'll demonstrate this strategy's limitations and what can happen when things do not work out as planned. When the strategy is incorrect, the bands are still broken and you'll find that the price continues its decline as it rides the band downward. Unfortunately, the price does not [rebound](https://www.investopedia.com/terms/r/rebound.asp) as quickly, which can result in significant losses. In the long run, the strategy is often correct, but most traders will not be able to withstand the declines that can occur before the [correction](https://www.investopedia.com/terms/c/correction.asp). For example, IBM closed below the lower Bollinger Band on Feb. 26, 2007. The selling pressure was clearly in oversold territory. The strategy called for a buy on the stock the next trading day. Like the previous examples, the next trading day was a down day; this one was a bit unusual in that the selling pressure caused the stock to go down heavily. The selling continued well past the day the stock was purchased and the stock continued to close below the lower band for the next four trading days. Finally, on March 5, the selling pressure was over and the stock turned around and headed back toward the middle band. Unfortunately, by this time the damage was done. Image by Sabrina Jiang © Investopedia 2020 In a different example, Apple closed below the lower Bollinger Bands on Dec. 21, 2006. Image by Sabrina Jiang © Investopedia 2020 The strategy calls for buying Apple shares on Dec. 22. The next day, the stock made a move to the downside. The selling pressure continued to take the stock down where it hit an [intraday](https://www.investopedia.com/terms/i/intraday.asp) low of \$76.77 (more than 6% below the entry) after only two days from when the position was entered. Finally, the oversold condition was corrected on Dec. 27, but for most traders who were unable to withstand a short-term [drawdown](https://www.investopedia.com/terms/d/drawdown.asp) of 6% in two days, this correction was of little comfort. This is a case where the selling continued in the face of clear oversold territory. During the [selloff](https://www.investopedia.com/terms/s/sell-off.asp) there was no way to know when it would end. ## What We Learned The strategy was correct in using the lower Bollinger Band to highlight oversold market conditions. These conditions were quickly corrected as the stocks headed back toward the middle Bollinger Band. There are times, however, when the strategy is correct, but the selling pressure continues. During these conditions, there is no way of knowing when the selling pressure will end. Therefore, a protection needs to be in place once the decision to buy has been made. In the NYX example, the stock climbed undaunted after it closed below the lower Bollinger Band for a second time. The strategy correctly got us into that trade. Both Apple and IBM were different because they didn't break the lower band and rebound. Instead, they succumbed to further selling pressure and rode the lower band down. This can often be very costly. In the end, both Apple and IBM did turn around and this proved that the strategy is correct. The best strategy to protect us from a trade that will continue to ride the band lower is to use [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp). In researching these trades, it has become clear that a five-point stop would have gotten you out of the bad trades but would have still not gotten you out of the ones that worked. ## The Bottom Line Buying on the break of the lower Bollinger Band is a simple strategy that often works. In every scenario, the break of the lower band was in oversold territory. The timing of the trades seems to be the biggest issue. Stocks that break the lower Bollinger Band and enter oversold territory face heavy selling pressure. This selling pressure is usually corrected quickly. When this pressure is not corrected, the stocks continued to make new lows and continue into oversold territory. To effectively use this strategy, a good [exit strategy](https://www.investopedia.com/terms/e/exitstrategy.asp) is in order. Stop-loss orders are the best way to protect you from a stock that will continue to ride the lower band down and make new lows.
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