How Do I Set Bollinger Band Technical Indicator on Chart?

Bollinger Bands Analysis & Bollinger Band Signals

Developed by John Bollinger

Bollinger Band are formed by 3 lines. The middle line is a MA - 20 period Simple MA.

The bands are then plotted at a distance away from the MA These are the bands which form the lower and upper lines.

The distance where the bands are plotted is determined by another technical indicator called the standard deviation. Standard deviation is a gauge of volatility in the forex market or that of a currency pair.

Since the market volatility keeps on changing, the standard deviations will keep fluctuating, & since Bollinger bands are plotted using the standard deviation the distance of the bands will keep on adjusting themselves to the market conditions.

When the markets become more volatile, the bands widen and they contract during less volatile periods.

The 3 Bands are designed to encompass the majority of a currency price action. The middle band forms the basis for the market trend, typically a 20-periods simple Moving Average.

This band also serves as the base for the upper and lower bands. The upper band's & lower band's distance from the middle band is determined by volatility. The upper bollinger band is drawn at +2 standard deviations above the middle +boollinger band while the lower +boollinger band is drawn at -2 standard deviations below the middle +boollinger band.

Learn Bollinger Bands Indicator Analysis - Place Bollinger Bands Indicator on Chart

FX Technical Analysis and How to Generate Signals

Bands provide a relative definition of high & low

Used to identify periods of high & low volatility

Used to identify periods when prices are at extreme levels

Consolidation - the Squeeze

The bands tighten as volatility lessens, this identifies periods of consolidation. Sharp price break-outs tend to occur after the bands tighten.

Forex Consolidation

Consolidation Pattern

Continuation Forex Signal - the Bulge

If prices break through the upper or lower band move outside the bands a continuation of the current trend is expected.

Bollinger Bands Analysis - How to Place Bollinger Bands Indicator on Forex Chart

Reversal Signals - Double Top and Double Bottom Patterns

Bottoms and tops made outside the bands followed by bottoms & tops made inside the bands call for reversals in the market trend

How Do I Place Bollinger Bands Indicator on Forex Chart on Forex Software?

The Head Fake - Forex Whipsaw

Forex traders should be on the lookout for false breakouts known as whipsaws or head fakes.

Price often breaks out in one direction immediately following the Squeeze causing many traders to think the break-out will continue in that particular direction, only to quickly reverse and make the true, more significant break-out in the opposite trend direction.

Traders acting quickly on the initial break-out often get caught on the wrong side of the market price action, while those traders expecting a "false breakout" can quickly close out their original position and enter a trade in the direction of reversal. It's always good to combine Bollinger bands with other confirmation Technical Indicators.

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