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Bollinger Bands Price Action in Ranging Forex Markets

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

 

It is very important because it is used to give indications that a break out may be upcoming. During a trending market these techniques do not hold, this only holds as long as Bollinger Bands are pointing sideways.

  • If the market touches the upper band it can be considered overextended on the upside - overbought.
  • If the market touches the lower band the currency can be considered overextended on the bottom side - oversold.

 

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

  • If price has bounced off the lower band and crossed the center-line moving average then the upper band can be used a sell level.
  • If price bounces down off the upper band and crosses below the center moving average the lower band can be used as a buy level.

Bollinger Bands Price Action in Ranging Forex Markets

Bollinger Bands Ranging Markets


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

 

Trades can be opened when the market hits the upper resistance level or lower support level. A stop loss should be placed a few pips above or below depending on the trade opened, just in case the price action breaks out of the range.