How to use Bollinger Bands indicator for trading forex - Using indicators and trading systems is a natural thing in forex trading, a trader who uses indicators in transactions means using technical analysis. Lots of indicators are available and can be used by traders on the 4 and 5 metatrader platforms, one indicator that is widely used by traders around the world is the Bollinger Bands.
Bollinger Bands are a sophisticated form of trading bands developed by John Bollinger and used by traders all over the world. However, like other forex indicators, this bollinger bands indicator can only provide an overview of the price in the market, NOT for absolute BUY and SELL signals. Bollinger Bands is a combination of simple but accurate Moving Averages (MA) indicators. The BB indicator itself consists of a Simple Moving Average (SMA) which appears to be bounded by a line called the upper bands and lower bands which is calculated based on the standard deviation above and below the SMA.
How to setting Bollinger bands indicator
To add Bollinger bands indicator settings to your Metatrader is quite easy. The best Bollinger Bands setting in most charting software is with a period of 20, with a bands distance of two standard deviation.
Follow these step to add bollinger bands indicator to metatrader 4
- Open metatrader 4 -
- Please choose " insert "
- Please choose " Indicator "
- Please chhose " Trend "
- Please choose " Bollinger Bands "
How to read bollinger bands indicator
By using the middle bands default setting for the 20 SMA period, and each bands is two standard deviations from the middle bands, it means that there is only a 5 percent chance that the price will touch the outer bands. This calculation assumes that all elements are sampled (the last 20 periods) are the same, and all these prices are equally possible. When there is no strong trend or even no trend at all, then the assumption holds. Price action when the market is flat also indicates that market perceptions of the value of a currency pair have not changed materially.
Knowing how to use the Bollinger bands indicator for trading is good, you will be able to see and predict where the next price will go to ensure a strategy for entry and exit points on the forex market. We hope this article will help you find your best forex trading strategy.