Using Bollinger Bands in Trading Forex
In this modern era of foreign exchange, there are useful indicator and technical analysis tools
that will help an individual in all of his trading decisions. One of the most popular trading tools in
the market today is the Bollinger Bands.
Bollinger Bands are some of the most sought after technical analysis tools that anyone can
use in order to engage in foreign exchange, even those in trading Forex online, in an effective
manner. Even the individual who is new in the field and trying to learn more by going through a
Forex trading course will soon find out the effectiveness and usefulness of Bollinger Bands.
What are Bollinger Bands? They were created in the 80’s by John Bollinger, popular financial
analyst and trading expert, who has great concern on which tool is best used by traders to make
their involvement in the field much easier. Today, Bollinger bands are considered as the best
tools when it comes to trading analysis software and chart platforms. In fact, they are the most
used financial tool option for a great number of traders and trading companies today.
What do Bollinger Bands actually offer? These financial tools are effective in measuring the
direction of prices in relation to the previous trade moves. When a foreign exchange trader adds
such bands to his existing charts, three lines will be shown. The line in the middle is a simple
moving average. On the other hand, the lines above and below the middle lines are actually
present according to the current volatility, which is the standard deviation in the information
utilized to obtain the simple moving average, which usually possess the numerical value of 20.
The gap existing between the chart lines actually varies. This presents the volatility that can be
experienced in the currency pair. When they are far apart this indicates volatility, and when the
bands have only a slight slope and lie approximately parallel for an extended time, the currency
pair will be found to move up and down between the bands as if they are moving through a
channel.
One of the common occurrences when adding the Bollinger Bands to a chart is that the prices
usually have a reaction on either the lower or upper band but in the end will go back to the
middle band. Such reaction is known to the trading circle is the Bollinger Bounce and many
foreign exchange traders utilized such information in their market trading activities. Generally
such occurrence is considered as excellent in the bigger time frames but cannot be utilized on
its own when trading.
Bollinger Bands are very useful to many traders because it is excellent in spotting new trends
and breakouts. For example if the foreign market experiences narrow range trading, the bands
narrow together and in effect will advise the trader of a current market having low volatility. This
is also a warning that a trending of high volatility is most likely to follow. Likewise, Bollinger
bands will help a trader get in by telling him when it is actually feasible to do the entry. All that
he has to do is check on the direction of the trend.
In this modern era of foreign exchange, there are useful indicator and technical analysis tools
that will help an individual in all of his trading decisions. One of the most popular trading tools in
the market today is the Bollinger Bands.
Bollinger Bands are some of the most sought after technical analysis tools that anyone can
use in order to engage in foreign exchange, even those in trading Forex online, in an effective
manner. Even the individual who is new in the field and trying to learn more by going through a
Forex trading course will soon find out the effectiveness and usefulness of Bollinger Bands.
What are Bollinger Bands? They were created in the 80’s by John Bollinger, popular financial
analyst and trading expert, who has great concern on which tool is best used by traders to make
their involvement in the field much easier. Today, Bollinger bands are considered as the best
tools when it comes to trading analysis software and chart platforms. In fact, they are the most
used financial tool option for a great number of traders and trading companies today.
What do Bollinger Bands actually offer? These financial tools are effective in measuring the
direction of prices in relation to the previous trade moves. When a foreign exchange trader adds
such bands to his existing charts, three lines will be shown. The line in the middle is a simple
moving average. On the other hand, the lines above and below the middle lines are actually
present according to the current volatility, which is the standard deviation in the information
utilized to obtain the simple moving average, which usually possess the numerical value of 20.
The gap existing between the chart lines actually varies. This presents the volatility that can be
experienced in the currency pair. When they are far apart this indicates volatility, and when the
bands have only a slight slope and lie approximately parallel for an extended time, the currency
pair will be found to move up and down between the bands as if they are moving through a
channel.
One of the common occurrences when adding the Bollinger Bands to a chart is that the prices
usually have a reaction on either the lower or upper band but in the end will go back to the
middle band. Such reaction is known to the trading circle is the Bollinger Bounce and many
foreign exchange traders utilized such information in their market trading activities. Generally
such occurrence is considered as excellent in the bigger time frames but cannot be utilized on
its own when trading.
Bollinger Bands are very useful to many traders because it is excellent in spotting new trends
and breakouts. For example if the foreign market experiences narrow range trading, the bands
narrow together and in effect will advise the trader of a current market having low volatility. This
is also a warning that a trending of high volatility is most likely to follow. Likewise, Bollinger
bands will help a trader get in by telling him when it is actually feasible to do the entry. All that
he has to do is check on the direction of the trend.
