Bollinger Bands Price Action in Trending Forex Markets
Bollinger Bands indicator is used to identify and analyze trending markets. In a trending market this indicator clearly shows up or down direction.
This indicator can be used to determine the direction of the Forex trend. In an uptrend this indicator will clearly show the direction of the trend, it will be heading upwards and price will be above middle Bollinger.
In a downtrend the price will be below the middle band and the bands will be heading downwards.
By observing the patterns formed by bollinger bands a trader can determine the direction in which the market is likely to move.
Patterns and Continuation Signals
- During an upswing, the candlesticks will stay within the upper band and the central moving average.
- Prices that close above the upper band are a sign of bullish continuation.
- Prices can hug/ride the upper band during an uptrend
- During a down swing, the candlesticks will stay within the moving average and the lower band.
- Prices that close below the lower band are a sign of bearish continuation.
- Prices can hug/ride the lower band during an downtrend