Forex Trading with Bollinger Bands
Forex Trading with Bollinger Bands
As you have already seen, technical indicators are powerful allies in trading, it would be foolish to do without. We have already considered several indicators in previous articles. Now I want to talk about another indicator – Bollinger Bands – and tell about its essence in technical analysis.
What is Bollinger bands?The indicator got its name in honor of its creator John Bollinger, a world-famous trader who is the president of Bollinger Capital Management. He also has his own website, where you can read more about both the author himself and his Bollinger Bands indicator.
John BollingerBollinger Bands is an oscillating indicator that is used to measure volatility and determine the trend in the market. It allows you to assess whether a price is high or low compared to a moving average for some time past.
The description of the indicatorBollinger Bands consist of three main lines (bands):
- The center line is a moving average.
- The upper line is the same center line, shifted upward by a certain number of standard deviations (for example, by two).
- The bottom line is the middle line, shifted down by the same number of standard deviations.
That is, the upper and lower bands are levels at which the price can be considered high enough or low enough relative to the moving average for some time past.
Signals of the indicatorIn general, since this is a trend indicator, Bollinger Bands (BB), as a rule, do not give concrete signals when and how to open positions. He has a completely different task:Bollinger Bands seem to measure the "loudness of the market". They are designed to show the trader in what state (trend or flat) the market is at a given time. Based on the state of the market, traders make their own conclusions for themselves and enter or exit the market.
So I will not tell when and how to buy or sell, as it will be wrong on my part. I would like just to give some advice and tips on using the BB indicator.
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