Bollinger Bands Trading Strategy – Failed 3BB

Today we will discuss another Bollinger Bands Trading Strategy using Bank of India Trade which was demonstrated life earlier.

Hopefully, you have interpreted the Bollinger Ride Strategy and its failed case which we call 3BB but what happens if 3BB fails too. It does happen many time right? Let us see some examples –

Bollinger Trading Strategy

This is BankNifty case.

Bank India Share price

This is Bank India case which we were talking about.

Hindustan Unilever Futures

This is Hindustan Unilever Futures which was shorted today.

Bharat Forge May Futures.

This is the case of Bharat Forge May Futures. These are all examples of where 3BB went invalid and we got the double loss. So how to trade this?


1. Bollinger Bands Trading Strategy – BRS, 3BB
2. Examples of Bollinger Bands Trading Strategy

So from historical backtested results as well as based on volume profile and Fibonacci there exists a trade here. BRS has more POP than 3BB. 3BB failed strategy has more POP than 3BB.

If we see with volume profile, we see people have heavily traded in that area on the tussle of last 3 candles which was struggling towards opposite directions.

So whenever the 3BB fail happens it creates a breakout spike. In the case of Bank of India, the breakout was towards downside because those who had long the stock in the early regions closes their position out of fear. But let’s not go there in details.

The trade here in case of Bank of India is that you can long it from the lower level and if you draw a line from the 3BB formation; the scrip is bound to touch there from the downside.

So for the Bank India case, we get a failed 3BB breakout at point A. Now tricky point is to find the B point. There are many theories you can use to find point B. Many people like the approach of Fibonacci; many people like the approach of Volume Profile.

I like to explain using Volume Profile analysis. It didn’t manage to break that Volume Profile barrier here which is confirmed by the huge green candle of point B. So we entered long in the next candle of this. (i.e. after confirmation that it is unable to break Volume Profile barrier)

Also, failed cases of 3BB make high value of STOCH showing an eminent overvaluation. In this case of Bank India, it is oversold.

So what happens when it doesn’t manage to break the volume profile barrier? It reverses and tries to break the other volume profile barrier on the other side. Correct?

By Volume Profile barrier, I meant the large spike of volume profile which you can see here. It means people have entered in that position and hence it will create as temporary support or resistance.

Volume Profile Barrier

As the reversal happens, where is the next volume profile barrier? The line where failed 3BB happened. It creates a huge barrier!  Now, two cases can happen –

  1. Either it will break that barrier.
  2. Or, it won’t! And it will reverse from there.

But we don’t bother in those cases. We just are happy on the fact that it will reach that line and we exit it safely.

So in short, I am taking this Bank India trade to explain –

  1. We entered a sell position using BRS on the preceding candle of Candle A.
  2. We entered a buy position using 3BB on the next candle of Candle A.
  3. As it is 3BB, our position is closed as the “low” 2nd next candle to Candle A is lower than “low” of next candle of Candle A where we have entered using 3BB. (Note: 3BB uses price action to exit)
  4. We enter a buy position on the next candle of Candle B and exit on the high of Candle A.

Bollinger Bands Trading Strategy – F-3BB

What the strategy does do is delay losses. Under the right conditions, losses can be delayed by so much that it seems a sure thing. We shall discuss this later on.

So, in here we are increasing the position as our probability of profit in increasing which makes it a gem because we also do have a strict stop loss system here. (In this case the low of candle B)

So we have entered long in Bank India Futures with 3 lots and now we need to concentrate on our exit strategy for maximal profit (i.e. other than just stopping on that line of failed 3BB)

Bank India Share Price

This weightage is not a necessity. It is an arbitrary greedy idea to maximize profit. Conservative investors can always opt-out.

From the above image, you can see where I have plotted the appropriate take profit lines –

  1. The first exit is as per the rule of F-3BB.
  2. The second exit is median Bollinger.
  3. The third exit is the upper band.

1st entry’s SL is at entry candle’s low. ( but choose SL at candle’s high in reverse case) 2nd entry’s SL is at first exit. 3rd entry’s SL is at the third exit. This is the simple trailing loss setup for the martingale case of F-3BB.