What is Bollinger Bands Indicator? - Definition of Bollinger Bands Indicator
Bollinger Band indicator - Bollinger Bands indicators is a popular forex technical indicator that can be found on the - Indicators List on this website. Bollinger Bands indicator is used by traders to forecast price movement based on the chart price analysis done using this Bollinger Bands indicator. Traders can use the Bollinger Bands buy and Sell Signals explained below to determine when to open a buy or sell trade when using this Bollinger Band indicator. By using Bollinger Bands and other indicators combinations traders can learn how to make decisions about market entry & market exit.
What's Bollinger Bands Indicator? Bollinger Bands Indicator
How Do You Combine Indicators with Bollinger Band? - Adding Bollinger Bands on MT4
Which Indicator is the Best to Combine with Bollinger Bands?
Which is the best Bollinger Bands indicator combination for forex trading?
The most popular indicators combined with Bollinger Bands are:
- RSI
- Moving Averages FX Indicator
- MACD
- Bollinger ##BandsBand
- Stochastic Indicator
- Ichimoku Kinko Hyo Indicator
- Parabolic SAR
Which is the best Bollinger Bands indicator combination for Forex trading? - Bollinger Bands MT4 indicators
What Indicators to Combine with Bollinger Bands?
Get additional indicators in addition to Bollinger Bands indicator which will determine the trend of the forex market as well as others that confirm the market trend. By combining forex indicators that determine trend and others that confirm the trend & combining these indicators with Forex Bollinger Bands indicator a trader will come up with a Bollinger Bands based system that they can test using a forex demo practice trading account on the MT4 software.
This Bollinger Bands based system will also help traders to determine when there is a market reversal based on the indicators signals generated and therefore trades can know when to exit the market if they have open trade transactions.
What is Bollinger Bands Indicator Based Trading? Indicator based system to interpret price and provide trading signals.
What is the Best Bollinger Bands Forex Strategy?
How to Select the Best Bollinger Bands Forex Strategy
For traders researching on What is the best Bollinger Bands forex strategy - the following learn forex tutorials will help traders on the steps required to guide them with coming up with the best strategy for trading forex market based on the Bollinger Bands indicator system.
How to Create Bollinger Bands Forex Systems
- What is Bollinger Band Indicator Strategy
- Creating Bollinger Bands Forex Strategy Template
- Writing Bollinger Bands Forex Strategy Rules
- Generating Bollinger Bands Forex Buy and Bollinger Bands Sell Signals
- Creating Bollinger Bands Indicator System Tips
About Bollinger Band Indicator Explained
Bollinger Bands Technical Analysis and Bollinger Band Signals
Created by John Bollinger
Bollinger Bands are formed by three lines. Middle line is a Moving Average - 20 period Simple MA.
The bands are then plotted at a distance away from the MA These are the bands that form the lower and upper lines.
The distance where the bands are plotted is determined by another indicator called the standard deviation. Standard deviation is a measure of volatility in the fx market or that of a forex pair.
Since the market volatility keeps on changing, the standard deviation will keep varying, & 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 fx currency price action. The middle band forms the basis for the market trend, typically a 20-periods simple MA.
This band also serves as the base for the upper & lower bands. The upper band's and lower band's distance from the middle band is determined by volatility. The upper band is plotted at +2 standard deviations above the middle band while the lower band is plotted at -2 standard deviations below the middle band.
Forex Analysis & How to Generate Signals
- Bands provide a relative definition of high and low
- Used to identify periods of high and 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 breakouts tend to occur after the bands tighten.
Consolidation Pattern
Continuation Signal - the Bulge
If prices break through the upper or lower band move outside the bands a continuation of the current trend is expected.
Reversal Signals - Double Top and Double Bottoms Setups
Bottoms & tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the market trend
The Head Fake - FX Whipsaw
Traders should be on the lookout for false breakouts known as fake outs or head fakes.
Price often breaks out in one direction immediately following the Squeeze causing many traders to think the breakout will continue in that direction, only to quickly reverse & make the true, more significant breakout in opposite direction.
Traders acting quickly on the initial breakout often get caught on the wrong side of the price action, while those traders expecting a 'false breakout' can quickly close out their original position and enter a trade in direction of reversal. It is always good to combine Bollinger bands with other confirmation Indicators.
