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- The Bollinger Bands Forex Strategy Guide
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Non-necessary Non-necessary. Accessing this course requires a login. Please enter your credentials below! Most recently there is also a buy signal in June , followed by an upward trend which persists until the date the chart was captured. Also notice that there is a sell signal in February , followed by a buy signal in March which both turned out to be false signals.
Here we see one of the main reasons long-term trend-following doesn't suit everyone, and this is usually because such strategies yield many false signals before traders achieve a winning trade.
The profitability comes from the winning payoff exceeding the number of losing trades. Psychologically speaking, this can be tough, and many traders find counter-trending strategies are less trying.
Technical Analysis from A to Z
Fortunately, counter-trenders can also make use of the Bollinger bands Forex indicator, particularly if they are looking at shorter time-frames. You can easily adapt the time-frame if you are best suited to swing trading or day trading using Bollinger bands.
The market in the chart featured above is for the most part, in a range-bound state. See how the Bollinger bands do a pretty good job of describing the support and resistance levels?
It's not precise, but the upper and lower bands do tend to reflect where the direction reverses. Recognising that this is not an exact science and is another key aspect of understanding Bollinger bands and their use for counter-trend Forex trading. When the market approaches one of the bands, there is a good chance we will see the direction reverse sometime soon thereafter.
A counter-trender has to be very careful however and exercising proper risk management is a good way of achieving this.
The Bollinger Bands Forex Strategy Guide
Remember, these levels are battlegrounds, and eventually prices do breakout from such ranges. Here's the key point: you need to shut down a losing position quickly if there is any sign of a proper breakout. In the chart above, an RSI has been added as a filter to try and improve the effectiveness of the signals generated by this Bollinger band Forex strategy. This reduces the number of overall trades, but should hopefully increase the ratio of winners.
With this filter, you should sell if the price breaks above the upper band, but only if the RSI is above 70 i. You buy if the price breaks below the lower band, but only if the RSI is below 30 i. The CCI or Stochastic Oscillator indicators could also be used with Bollinger bands to create a similar Forex trading strategy to the above. Generally speaking, it is a good idea to use a secondary indicator like this, not just with Bollinger Bands, to confirm what the primary indicator is saying and to, therefore, help ensure trading signals are more reliable.
We hope you enjoyed our guide on Bollinger bands and their application with Forex trading strategies. If you feel inspired to start trading using a Bollinger bands Forex trading strategy, why not practice first? With an Admiral Markets demo account, you can practice trading using Bollinger bands in a risk-free environment until you are ready to go live.
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Bollinger Bands - Wikipedia
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September 16, UTC. Reading time: 24 minutes. What Are Bollinger Bands? Where to close this position? The best way to define that is to wait until the price hits the opposite band of the Bollinger Bands indicator. In our case, we are talking about the upper band. Now it is the time to take a look at a price pattern called 'Double Top'. What is this model about?
The price goes upwards and hits its local high. Later, the price corrects itself and once the correction is over, it returns to its local highs. You can see that at the screenshot that we have posted above. What is next? The downtrend begins. Where to place an order? There are a few approaches, but we recommend waiting until the price breaks down the lower point of the previous correction.
However, if you use the Bollinger Bands indicator, you can open a position even earlier. You can see that the first top forms beyond the BB indicator. The second top is slightly below the upper band. You can open a short position once the second top is clearly seen.