The second, called Breakout Strategy focuses on identifying potential reversals or trend continuations when the price gets outside two bands.įinally, the third method called Squeeze can be helpful in forecasting market volatility and consequently the timing of opening and closing trades.Īll those strategies can be helpful in identifying and timing the potential tops and bottoms for Forex currency pairs, therefore it is still one of the most popular trading tools for traders. The first method among the Bollinger bands indicator strategies focuses on identifying the strength and the momentum of the latest trends, especially the currency pairs which trade near upper or lower bands. There are essentially three Bollinger Bands strategies traders can use in their technical analysis. So essentially, in times of high market volatility the bands are wider, than under normal conditions. The distance between those two lines is dependent on the standard deviation. This line has upper and lower bands, both of which move with the price changes. In the middle, we have the first one which is the Simple Moving Average of a specific number of periods here most often traders use 20-day SMA. This method was introduced and developed by John Bollinger in the 1980s.Īctually it takes three lines to compose Bollinger Bands.
One of the most popular ones is the Bollinger Bands ®. The experienced Forex traders might have many trading tools in their arsenal.
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