Bollinger Bands Price Action on Range-Bound Markets

Bollinger Bands Indicator is also used to identify periods when a market trend is overextended. The guidelines below are considered when applying this indicator to a sideways trend.

Bollinger Bands Indicator is very important because it is used to give signals that a price breakout might be upcoming.

During a trending market these techniques do not hold, this only holds as long as Bollinger Band are pointing sideways.

If the price touches/tests upper band it can be considered overextended on the upside - over-bought.
If the price touches/tests lower band the price can be considered overextended on the bottom side - over-sold.

One of the uses of XAUUSD Bollinger Bands indicator is to use the above overbought and oversold guidelines to establish buy & sell targets during a ranging market.

If gold price has bounced off the lower band crossed the center-line moving average then the upper band can be used a sell level.
If gold price bounces down off the upper band crosses below center moving average the lower band can be used as a buy level.

How to Trade Bollinger Bands Indicator in Range Market

Bollinger Band in Ranging Markets - Bollinger Band Strategy

In the above ranging market the instances when the price hits the upper or lower bands can be used as profit targets for long/short trade transactions.

Trades can be opened when the market hits the upper resistance zone or lower support zone. A stop loss should be placed a couple of pips above or below depending on the trade transaction opened, just in case the price action breaks-out of the range within these Bollinger bands.

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Bollinger Bands Price Action on Range-Bound Markets