Bollinger Bands.
All work on Forex is built on the basis of just a few fundamental tactics, one of which is Bollinger Bands.
Bollinger Bands are a tool for conducting technical analysis of the situation on the foreign exchange or stock market. Allows you to evaluate how different the current situation is compared to historical data.
Externally, this graphical construction consists of two lines, one of which is above the moving average (upper price limit), the second below (lower price limit).
As a result, a dynamic price channel is created, the width of which is constantly changing. In other words, the Bollinger channel characterizes the volatility of the Forex market over a certain time period, which is the starting point in the calculations.
And the data obtained allows us to estimate the price level in relation to previous periods. To build Bollinger Bands, the technical indicator of the same name has long been used, which you will find in almost any trader’s terminal. Its work is based on the principle that 95% of price fluctuations should be within the formed channel.
When you launch it, you can easily configure all the necessary parameters, and the construction of Bollinger ranges will take place automatically.
The trading strategy using these ranges is very similar to trading in a regular price channel.
Buy trades are opened if the price pushes off the lower line and rushes upward.
Selling transactions are opened under reverse conditions, when the price pushes off the resistance line and begins to move down.
Since the width of the Bollinger channel is constantly changing, the breakout strategy practically does not work, since the breakout itself is not visible on the chart of the currency pair, but only the expansion of the channel is noted.
To avoid troubles, it is advisable to enter into transactions in the direction of the main trend, without paying attention to corrective price movements.
In general, Bollinger Bands are a fairly effective tool for technical analysis, which can serve as a search for signals to enter the market.
This is just to assess current volatility. Read more about using this trading tactic in the following articles on this site.