In range-bound markets, this technique works well, as prices travel between the two bands like balls bouncing off the walls of a racquetball court. The upper band represents overbought territory, while the lower band can show you when a security is oversold. The middle line is a simple moving average with a default setting of 20 periods. The distance between itself and the outside bands is measures in standard deviations. The default setting for that distance is 2 standard deviations.
If you are not sure what standard deviations are or how they are calculated, do not worry. Realistically, you do not need to know that. The only factor you need to know is that standard deviations are used as a measuring tool for the distance between the simple moving average and the outside bands. Using Bollinger bands to trade into a trendBollinger bands measure volatility.
Remember, when trading Forex we do not get access to volume so volatility is absolutely crucial to our trading. Even though new techniques are developed constantly, the conventional methods are often as popular as they used to be.Bollinger bands are around 20 years old. However, they are one of the most accurate trackers of volatility in the forex market. It is essential to know the volatility degree, as it can often indicate whether or not a trend is going to reverse.Bollinger bands make use of the moving average.
They create a channel, placing the lower and the upper bands in the range. One needs a candlestick chart or a pricing chart to make the channels and calculate a smooth moving average. Typical values for N and K are 20 and 2, respectively. The default choice for how to trade using bollinger bands forex quotes average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages are a common second choice. PromotionsExclusive promotions and general forex promotions.
Industry Leading Affiliate System and RatesOur suite of powerful affiliate tools is available to every registered member to refer other traders up to 3 tiers deep and earn up to 17.5% commission while providing advanced tracking and analytics on client and traffic flow. Bollinger Bands consist of a band of three lines which are plotted in relation to security prices. The SMA then serves as a base for the Upper and Lower Bands. The Upper and Lower Bands are used as a way to measure volatility by observing the relationship between the Bands.
How to trade using bollinger bands forex quotes