Trading Bollinger Bands Indicator

Bollinger Bands

When the Bollinger Bands are an indicator, which was developed in the 1980s by John Bollinger, to obtain a relative ratio of high and low prices and get insights into the market volatility.

Trading bands, so the tapes on which way with the price moving and somehow these mostly fenced, there have been before.

Trading Bollinger bands consist of three lines.

The middle band is a simple moving average is a simple moving average. The default value for the Trading Bollinger bands is at 20

The upper band is calculated by multiplying the standard deviation of the moving average over n periods by a factor k. The factor k is usually located on 2nd For the upper Bollinger band added one that is 2 times the standard deviation.

The lower Bollinger band is calculated as vice versa. Here the standard deviation from the moving average is subtracted. On the calculation they have to do not worry, though, because as good as any includes charting platform Trading Bollinger bands.

To get an idea to do that, I've plotted the Bollinger Bands times on the chart. There is a daily chart of EURUSD. It is clear that the bands move with the trend, what is clear, since they follow the moving average.

As a forex trader can use Bollinger Bands basic rules to act?

As with all indicators, there are again several ways to use Bollinger bands. One of the most popular methods is to sell when the price touches the upper band and buy when the price touches the lower band. The stop loss is placed over the upper or lower Bollinger band and serves as a take profit in most cases, the Bollinger Bands middle band. Take a look at the chart. As you can see, would have sales once the price touches the upper band, not very successfully. Few exceptions, I have marked with arrows. It easier to buy would be if the price touches the lower band. So that we can not act against the trend, but make use of it. If you had bought the last red arrow, you would complete the following trend was there.

Another characteristic of Bollinger Bands is going to deal with rising volatility, and to converge with low volatility. The price for some time is in such a channel, a strong eruption is quite likely. This property can be used for breakout trades.

Finally, I would advise against buying from touching the tapes immediately or sell. This may work, but it's better if you find the combination with other indicators, Bollinger Bands to so with a higher probability of good trades.