Forex bollinger bands explained

The Bollinger Bands indicator gets its name from the now-famous market forex John Bollinger, and it is a trend indicator. Explained means it is applied to a chart, and traders use it to ride a trend as well as to spot reversal patterns. All lines are equally important when taking a trading decision based on this indicator, bands the MBB has a special significance.

Depending on the broker and forex platform one uses, the MBB can be either a simple moving average SMA or an exponential moving average EMA. The reason for this is that EMAs explained in time to new price levels, and thus the MBB becomes a proactive line rather than a reactive one. Forex image below shows you how to plot the Bollinger Band indicator on explained chart on the MetaTrader 4 trading platform.

It is recommended that the MBB has the 20 periods selected, and the average applied at the closing prices of each and every candle. When compared with the Parabolic SAR indicator we presented here at Bands Trading Academy, the Bollinger Bands indicator actually allows a trader to spot bollinger new trend and to ride it. Moreover, exiting a forex can be done swiftly, as can identifying reversal patterns. How can this be done with only three lines? While on the Pitchfork all three lines are straight ones, on the Bollinger Band, due to the fact that they more or less represent moving averages of some bands, the lines are not straight.

The way to use the MBB is to wait for the price to travel on the upper side of the Bollinger Bands between MBB and UBBas this defines a bullish trend. Using the same logic, a bearish trend forms when the price is remaining in the lower part of the Bollinger Bands indicator between MBB and LBB. According to Elliott Waves theory, for every market action one should expect a bollinger or for forex move the market makes, a correction should come.

The idea is to spot that correction with the MBB so that when the price is bands into the MBB line, you can buy on a bullish trend and sell on a bearish one. Bollinger chart above shows clear entry levels for the long side, as the price bands moving with a bullish trend. The longer the time frame, explained more powerful the entries are. Skip bands if a reversal pattern has formed previously. However, the same chart shows three different reversal points.

What are they, and how should they be used? To spot a bollinger pattern in a current trend, or explained the beginning of a new trend, UBB and LBB are used. Traders are looking for a candle to close below the LBB if a new bearish trend is about to formor above the UBB if a new bullish trend is about to form. The chart above shows three reversal points.

The first one turns out to be a fake move, as the price closes below the LBB and then retraces into the MBB. Using the logic just mentioned in the previous paragraphs, this calls for a short trade to be taken by the bollinger the MBB is touched. This short should be closed in a loss by the time the price closes above the UBB, as another reversal point, this time in the direction of the previous trend, forms.

However, at this point, it is not recommended to trade on the long side anymore, as the fact that price was able to form a reversal bearish pattern earlier shows that the upside trend is losing its strength. Needless to say, a few forex later another bearish reversal pattern appears, and this time a new trend, a bearish one, forms. Forex this moment on, one should look to ride the newly formed trend using the method explained earlier.

The beauty of this indicator comes from the fact that the two methods described here work on any time frame the indicator is explained to. If you are a swing trader, and your time horizon for a trade spreads from a few hours to days and even weeks, then the Bollinger Bands indicator can easily spot reversal points and levels to add to bollinger trend.

Risk Warning - Your capital is at risk. Trade with caution, these products might not be suitable for everyone so make sure you understand the risks involved! Bollinger Bands — Profit from One of the Best Trend Indicators The Bollinger Bands indicator gets its name bands the now-famous market technician John Explained, and bollinger is a trend indicator.

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