Bollinger Bands Forex Price Action in Ranging Forex Markets
Bollinger Bands Forex Indicator is also used to identify periods when a forex market trend is overextended. The guidelines below are considered when applying this forex trading indicator to a sideways forex trend.
Bollinger Bands Forex Indicator is very important because it is used to give forex signals that a forex price breakout may be upcoming.
During a forex trending market these techniques do not hold, this only holds as long as Bollinger Bands are pointing sideways.
- If the forex market price touches the upper band it can be considered overextended on the upside - overbought.
- If the forex market price touches the lower band the currency can be considered overextended on the bottom side - oversold.
One of the uses of Forex Bollinger Bands indicator is to use the above overbought and oversold forex trading guidelines to establish buy and 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 the center moving average the lower band can be used as a buy level.
Trading Bollinger Bands in Ranging Forex Markets - Bollinger Bands Forex Trading Strategy
In the above ranging forex market the instances when the forex price hits the upper or lower bands can be used as profit targets for long/short forex trade positions.
Forex trades can be opened when the forex market hits the upper resistance level 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.