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Bollinger Bands Forex Strategies

Bollinger Bands Forex Indicator Strategy

This indicator acts as a measure of volatility. This indicator is a price overlay indicator. The indicator consists of three lines; the middle line (moving average), an upper line and a lower line. These three bands will enclose the price and the price will move within these three bands.

 

This indicator forms upper and lower bands around a moving average. The default moving average is the 20-SMA. This indicator use the concept of standard deviations to form their upper and lower Bands.

The example is shown below.

Bollinger Bands Forex Trading Indicator

Bollinger Bands Indicator


Because standard deviation is a measure of volatility and volatility of the market is dynamic, the bands keep adjust their width. higher volatility means higher standard deviation and the bands widen. Low volatility means the standard deviation is lower and the bands contract.

 

Bollinger Bands use price action to give a large amount of information. The information given by the this indicator includes:

 

  • Periods of low volatility- consolidation phase of the Forex market.
  • Periods of high volatility- extended trends, trending Forex markets.
  • Support and resistance levels.
  • Buy and Sell points.

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