The Bollinger Bands technical indicator traces its roots back to the primordial Trading Bands or Price Envelope. Instead, maybe you want to look at the strength of the overall trend, and if the market is trending, you can add in contingencies that the price at the bollinger band needs to give you extra confirmation like say a price pattern that needs to be broken or you can introduce a faster paced MA that you can use to move your stop to breakeven, ensuring that you don’t lose on small price rallies or breaths” in a trending move.
You can then take a short position with three target exit areas: (1) upper band, (2) middle band or (3) lower band. When you choose to use Bollinger bands in your trading, you can adjust the standard default parameters, which are usually 20 periods and 2 deviations, to suit your taste.
Along with giving the trader an indication of future volatility ahead, this Bollinger bands strategy will show support and resistance in a trending market, often repelling prices back into the trend once more. However, a good knowledge, and luck is needed to study the complex Forex trading strategies to gain.
First insert a standard set of Bollinger bands: Select the Bollinger bands option from your menu of indicators and click for more info your settings select 2 standard deviations and 20 periods. A Bollinger Band scalping strategy applies easily, and you can trade the whole move until its end.
An important concept to understand in forex trading is that prices will typically move from periods of low volatility to periods of high volatility and back again. Therefore, it is no wonder that over 90% of the time price is spending between the Bollinger bands.
Traders do not need to use any indicators other than what is found on pricing charts, which makes this Forex trading strategy manageable, even for amateur traders. At these times, the Bollinger bands narrow greatly to form the Bollinger squeeze. Some traders prefer this type of trade setup, which is quite fine, so long as the trader understands that this is more of a mean reversion strategy and requires stricter risk management controls.
The lower risk, higher reward move is to refrain from trading until price makes a decisive move into the buy or sell zone (we have a trustworthy trend) or switch to a range trading strategy. For instance, if an engulfing pattern were to appear on the charts at either the lower or upper Bollinger band, then this may be a sign to trade a reversal of price which is expected to occur.
The Bollinger Bands EA is a forex robot which uses Bollinger Bands to enter a trade. The purpose of the research was to determine if the strategy that Nick mentions in the podcast has potential in other markets. Professional traders book 50% of their trading profit in the mid band of the Bollinger band indicator and set their stop-loss to the breakeven point.