Bollinger Bands Forex trading indicator.

This popular forex trading indicator was created on base more old "Envelope" method of moving averages trading indicators by J.A. Bollinger, CEA, CMT (Bollinger Capital Management, Inc., PO Box 3358, Manhattan Beach, 90266, phone (310) 798-8855, www.bollingerbands.com).

Unlike "Envelopes" of moving averages, where resistance line displaced on fixed percents above moving average and support on its amount of percents below moving average, Bollinger creates resistance on two standard deviations above moving average and support on two standard deviations below 20-periods simple moving average (SMA).

The Bollinger Bands can be used for any time frames - from 1-minute to months. The Bollinger Bands helps trader to fast react for important price movements and understand, is the price situated high or low comparatively normal price range. Bollinger uses its bands together with another forex trading indicators how tool for price movements range defining.

For price trend with middle long of life Bollinger suggests for use 20-periods simple moving average plus and minus two standard deviations. Such charts most popular among forex professionals. Bollinger suggests use 10-periods simple moving average plus and minus 1.5 standard deviations for short-term trends. For long-term trend 50-periods simple moving average plus and minus 2.5 standard deviations suggested by Bollinger.

Bollinger says, that the moving average period must to depend on chart timeframe. This period almost always differs from moving average periods, which are uses in moving averages crossing strategy. From many moving averages Bollinger suggest to choose the one, which supply support first movement correction from below upwards. If the correction brake the moving average, its mean that the moving average period too small. If the correction don't reach the moving average, its mean that moving average period too long.

Moving average must to be support most of time, not be broken. Bollinger don't say, that the his Bands need to use like independent signal for trades, when the price touch band or crosses it. In first, the purpose of Bollinger Bands - to show the frame, where price can be analyzed by another forex trading indicators, On Balance Volume or Money Flow Index, for example. So, if the price touch top Bollinger Band and another trading indicator to say about powerful upper trend, this is not to signal for sell - it's signal for buy continuing.

And on the contrary, when the price touch top Bollinger Band and another trading indicator to say about low power of price movement, it's signal for sell. Another signal for sell: if after some increased maximums, reached top Bollinger Band or higher, and the last maximum don't reach top Bollinger Band, it's says about decreasing price growing and need to sell.

The principle of working with low Bollinger Band is opposite working with top Bollinger Band. So, if the price touch low Band and the second forex trading indicator says about market faintness, here not signal for sell, it's signal for buy. Another sample: if after some decreased minimums, touching low Bollinger Band or lower and last minimum can't reach low Bollinger Band, it's says about decrease of price decline speed and it's signal for buy.

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