Using Bollinger Bands In Currency Trading

Bollinger Bands in Forex


Bollinger Bands, invented by John Bollinger in the 80s in forex mainly used to reduce exchange rate volatility measure.

Bollinger Bands consist of 3 components:

The middle band: just rolling average over n periods
The upper band: K is an n-fold period, standard deviation above the central belt
The lower band: K is an n-fold period, standard deviation above the central belt

The default values for n and K are respectively 20 and 2

Bollinger Bands Interpretation

When the market volatility is low, then the upper and lower band transmit to each other (band convergence).
When the market volatility is high, then the upper and lower band of each other to remove (band divergence).
The food has always exchange rates tend to always return to the middle band.

Using Bollinger Bands In Currency Trading

Look out for a possible outbreak rate when the tires are very close together.
The exchange rate will likely continue to rise in a rising market when the price breaks through the upper band. The exchange rate will likely continue to decline in a falling market when the price breaks through the lower band.


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