Bollinger Band Price Action in Ranging Forex Markets

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

Bollinger Band is very important because it is used to give forex signals that a price breakout may be upcoming.

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

• If the forex market price touches/tests upper band it can be considered overextended on the upside - overbought.
• If the forex market price tests/touches lower band the currency can be considered overextended on the bottom side - over-sold.

One of the uses of Forex Bollinger Band is to use the above overbought and oversold forex guidelines to establish buy & sell targets during a ranging forex market.

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

Bollinger Band in Ranging Forex Markets - Bollinger Band Strategy

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

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

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