Bollinger Bands Price Action in Ranging Markets

Bollinger Bands Indicator is also used to identify periods when a market trend is overextended. The rules below are considered when applying this trading indicator to a sideways trend.

Bollinger Bands Indicator is very important because it's used to give trading signals that a price breakout may be upcoming.

During a trending market these techniques don't hold, this only holds as long as Bollinger Bands are pointing sideways.

If the price touches the upper band it can be considered over-extended on the up-side - over-bought.
If the market price touches/tests the lower band the currency can then be considered over-extended on the bottom side - oversold.

One of the uses of Index Bollinger Bands indicator is to use the above overbought & oversold guidelines to establish buy & sell targets during a ranging market.

If price has bounced off the lower band crossed the centerline MA then the upper band can be used a sell level.
If the price bounces down off the upper band crosses below the center moving average(MA) the lower band can be used as a buy level.

Trading Bollinger Bands on Ranging Markets - Bollinger Bands Index Trading Strategies

Bollinger Bands on Ranging Markets - Bollinger Bands Strategy

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

Trades can be opened when the 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 trade transaction opened, just in case the price action breaks out of the range within these Bollinger bands.

Get More Lessons:

Trade Forex Trading

Bollinger Bands Price Action in Ranging Markets