Bollinger Band Bulge & Squeeze Technical Analysis
The FX Bollinger Band are self adjusting which means the bands widen and narrow depending on forex price volatility.
Standard Deviation is the statistical measure of the market volatility of price used in calculating the narrowing or widening of the Bollinger bands. Standard deviation will be higher when the prices are changing significantly and lower when the prices are calmer.
- When forex price volatility is high the Bollinger Band widen.
- When forex price volatility is low the Bollinger Band narrows.
The Bollinger Band Squeeze - How to Trade the Bollinger Band Squeeze
Narrowing of Bollinger Band is a sign of price consolidation and is known as the Bollinger band squeeze.
When the Bollinger Band show narrow standard deviation it's generally a time of price consolidation, and it's a signal which there will be a price breakout and it shows traders are adjusting their trade positions for a new move. Also, the longer the prices stay within the narrow bands the greater the chance of a price breakout.
The Bollinger Band Squeeze - How to Trade the Bollinger Band Squeeze
The Bollinger Bulge - How to Trade Bollinger Band Bulge
The widening of Bollinger Bands is a sign of a price break-out and is known as the Bollinger Bands Bulge.
Bollinger Band that are far apart can serve as a trade signal that a market trend reversal is approaching. In the Bollinger bands indicator example below, the Bollinger bands get very wide as a result of high forex price volatility on the down swing. The forex trend reverses as prices reach and get to an extreme level according to statistics and the theory of normal distribution. The "bulge" predicts the change to a downtrend.
Bollinger Bulge - The Bollinger Bulge - How to Trade Bollinger Band Bulge
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