In the early days of knowing Olymp Trade and starting to trade on the platform, perhaps you have tested the Fixed Time trading strategy using the Out Band candlestick with the Bollinger Bands indicator in Olymp Trade. Most of you then realize that this is just an ineffective trading strategy and soon cause you to burn out your account.

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What is an Out Band candlestick? How to trade effectively in Olymp Trade with it?

In today’s article, I would like to give some personal experience of using Bollinger Bands when trading in Olymp Trade so that you can upgrade the simple trading strategy with Bollinger Bands that I mentioned in the first part. It is these little tips that helped me make money in Olymp Trade with only the Bollinger Bands indicator strategy.

Out Band candlesticks are candlesticks that have the closing price outside the Bollinger Bands indicator. In the online courses, the “teachers” will tell you that when you see an Out Band candlestick, you just need to open reversal orders to win. Some bet the next candle to have the opposite color of the Out Band candlestick. Others open reversal orders with an expiration time of 3 or 4 times the candle time period. They all make the Fixed Time trading strategy in Olymp Trade with the Out Band candlestick go bankrupt.

Understanding the Mathematical Core of Bollinger Bands

Before we dive into the specific rules of the Out Band candlestick strategy, it is absolutely essential to understand what Bollinger Bands are from a mathematical perspective. Developed by the legendary technical analyst John Bollinger in the 1980s, the indicator consists of three lines plotted relative to asset prices. The center line is typically a Simple Moving Average (SMA), usually set to a 20-day period. The upper and lower bands are plotted at standard deviation distances away from this SMA.

The standard formula is:
Middle Band = 20-Period Simple Moving Average (SMA)
Upper Band = 20-Period SMA + (2 x Standard Deviation of Price)
Lower Band = 20-Period SMA - (2 x Standard Deviation of Price)

In statistics, standard deviation is a measure of variance. When applied to financial markets, standard deviation acts as a proxy for volatility. Under normal distribution assumptions, roughly 95% of all price action should occur within these standard deviation bands. When a candlestick closes entirely outside the bands, it represents a statistical anomaly—an extreme move that happens less than 5% of the time. This is why the Out Band candlestick is such a powerful signal. It tells you that the market has stretched to its short-term limits. However, knowing that a price is stretched is only half the battle. If you trade reversals blindly, you will quickly face the dark side of volatility: strong, runaway trends.

My trading strategy is also with the Out Band candlestick

This is my trading result in 1 day with Out Band candlesticks based on the Bollinger Bands indicator in Olymp Trade. There were 5 wins, 1 draw, and 1 loss. Therefore, can I say I have already known how to trade effectively with an Out Band candlestick? What is the difference between me and you when trading in Olymp Trade?

To understand that, perhaps we will need to analyze each trading order. Then you will grasp some tips to upgrade this trading strategy. Accordingly, you can turn it into something that can help you make money in Olymp Trade.

Notes to remember when trading with the Out Band candlestick in Olymp Trade

Note 1: Consider the price trend every time opening an order

This is an order that I won easily with the Out Band candlestick. The price went sideways and had no clear trend. And then, the Bollinger Bands really came into play.

When the market is in a sideways consolidation phase, the Bollinger Bands lie horizontally, parallel to each other. During this state, the upper band acts as a strong resistance barrier, while the lower band acts as a strong support floor. Any price spike that pushes a candle to close outside the band will face heavy counter-pressures, pulling the price back toward the 20 SMA. Sideways range-bound markets are the absolute gold mine for the Out-Band candlestick strategy.

On the contrary, please continue with my other order.

This is an order that I luckily won in the last seconds. According to my trading strategy, this order is not allowed. This is because the price just broke out of a level and continued to go down. If you open an order in this case, you will probably lose. Attempting to catch falling knives during an active, high-volume breakout is a fatal mistake in fixed-time trading. You must avoid counter-trend trades when the bands start to widen or flare out.

Note 2: Previous Out Band or stick-to-the-bands candlesticks are a bad sign to open a reversal order

What do you see in this situation? Before a red candlestick appeared out of the lower band, there were 2 candles including an Out Band candlestick and a green candlestick that closed a small distance from the lower band. In this case, you can only stand outside and watch. If you place a reversal trade here, you are stepping directly in front of a high-speed train.

The more candlesticks that are close to the bands like this, the less effective for the later signals that the Out Band candlestick gives. It indicates that the price is being crushed and is following a strong trend. This phenomenon is known as “riding the band” or “band-walking”. It occurs when strong market momentum continuously pushes the price outside the typical boundary. In these situations, the outer bands expand dynamically to accommodate the surge. If you use the Classic capital management method, ignore these situations. Never try to fight strong trends.

Note 3: The Dangerous Trap of Martingale and Why Flat Position Sizing is Crucial

Many trading guides and self-proclaimed “gurus” recommend using the Martingale capital management method when trading reversals. The theory is that you double your trade amount after every loss so that a single win recovers all previous losses and leaves a small profit. While this sounds appealing on paper, in reality, it is a dangerous trap that will quickly lead to catastrophic losses and completely burn out your trading account. Below is an example from my own trading log that shows the extreme danger of this approach.

In the chart above, you can see that 5 warning candles had appeared before the Out Band candlestick appeared. The price was riding the upper band heavily. After the green Out Band candlestick formed, instead of reversing, the price continued to rise. If a trader were using Martingale, they would have lost the first trade, doubled the size on the second, lost that too, and doubled again on the third. While I managed to break even on the second and earn some profit on the third in this specific case, it was pure luck. In a true runaway trend, the market can print 8, 10, or even 12 consecutive candles along the band. By the 7th or 8th double, you will hit the platform’s trade limits or completely exhaust your account balance.

Therefore, we strongly advise you to completely avoid Martingale, grid systems, or loss-holding techniques. Instead, implement a professional risk management system based on the following pillars:

• The 2% Rule: Never risk more than 1% to 2% of your total account balance on a single trade. If you have a $1,000 account, your maximum trade size should be $10 to $20.
• Flat Position Sizing: Keep your investment size constant. If you decide to trade $10 per position, keep it at $10 for every signal. This ensures that even a long losing streak of 5 or 6 trades will only result in a minor draw-down that you can easily recover from, rather than a blown account.
• A Stable Risk-to-Reward Ratio: When trading Forex or Crypto modes, ensure your Stop Loss is placed at a logical level (e.g., above the rejection wick of the Out-Band candle) and your Take Profit is at least 1.5 to 2 times larger than the risk.

Note 4: If you are someone who likes safety, only open orders with Out Band candlesticks when the market goes sideways

That is really the most effective trading strategy using the Out Band candlestick. When the price goes sideways, it will immediately turn around when it encounters stiff levels or readjust around the middle band of the Bollinger Bands. And that is the best time for you to make money with this Out Band candlestick.

Let’s take a look at another win of mine when the price goes sideways.

How to Filter Fakeouts: Advanced Confirmation Checklist

To avoid the painful experience of trading fake breakouts, you must add structural and momentum confirmations to your Out-Band signals. Below is a checklist of filters you should run before opening any trade:

1. RSI/Stochastic Divergence: If the price prints a new high/low outside the Bollinger Bands, check the Relative Strength Index (RSI) or Stochastic Oscillator. If the oscillator shows a lower high (for an uptrend) or a higher low (for a downtrend), you have a classic divergence. This proves that despite the extreme price, the underlying buying or selling momentum is weakening.
2. Horizontal Support & Resistance: An Out-Band candlestick that closes exactly at a major historical support or resistance level is infinitely more reliable than one that closes in “open space”. Use the daily or 4-hour chart to draw key levels, and only take Out-Band reversals when they align with these structural barriers.
3. Reversal Candlestick Formations: Do not just trade the very moment a candle closes outside the band. Wait for a rejection candle to form, such as a Pin Bar, a Shooting Star, a Hammer, or a Bearish/Bullish Engulfing pattern. These shapes prove that buyers or sellers are actively fighting back and taking control.
4. Volume Verification: Look at the volume indicator. A genuine reversal usually occurs on high, climactic volume (indicating exhaustion) followed by a drop in volume as the price starts moving back inside the bands. If the volume continues to expand while the price rides the band, the breakout is strong and you should stand aside.

Comparison: Out-Band Rejection vs. In-Band Trend Continuation

Understanding when to trade reversals and when to follow the trend is key to mastering any Bollinger Bands strategy. Use this comparison table to guide your daily trading decisions:

Developing a Rule-Based Trading Plan

Consistent trading requires a strict, rule-based approach. Below is the step-by-step workflow you should follow to execute this strategy professionally:

• Step 1: Check the Economic Calendar: Never trade Out-Band reversals within 30 minutes before or after major economic news releases (e.g., NFP, CPI, interest rate decisions). High volatility news can break any technical range and push prices into runaway trends.
• Step 2: Identify the Market Structure: Look at the 1-hour and 4-hour charts to determine if the asset is ranging or trending. If the Bollinger Bands are squeezed or flat, proceed. If the bands are sloping steeply up or down, look for another asset.
• Step 3: Wait for the Out-Band Candlestick: Monitor the 5-minute or 15-minute chart. Wait for a candle to close completely outside the band. A partial breakout does not count.
• Step 4: Check Confirmations: Ensure that RSI is either overbought (>70) or oversold (<30) and shows divergence. Verify that the price is touching a historical support/resistance zone.
• Step 5: Execute and Control Risk: Open your trade with a flat size (maximum 2% of capital). For Fixed Time Trades, select an expiration time of 3 to 5 times the candlestick time period (e.g., 15-25 minutes expiration for a 5-minute candle). For Forex/Crypto trades, place a strict Stop Loss.

Summary

Up to here, you may have understood the difference between me and you when using the same Olymp Trade strategy. It does not lie in knowledge, in the capital, nor that I am more careful than you. Maybe, because I have stumbled enough on this path, so now I can take it easy.

However, please don’t be discouraged. Go ahead and improve yourself. I and this blog will always be with you on that journey. Goodbye and wish you a successful transaction.

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About the Author: Tran Hien

Tran Hien is the chief trading strategist at HowToTrade.blog, specializing in Price Action methodology, market structure, and technical analysis. With over a decade of active trading experience across Forex, Gold, and Crypto markets, he teaches retail traders how to develop rule-based trading plans and build professional risk management systems.