Bollinger Bands Review – The Binary Logic

How To Use Bollinger Bands:

Bollinger bands are forex indicators that explain the roaming of prices either up or down. The bands get narrow when the market system is slow and broadens w3hen the prices begin to rise up a bit. In most cases Bollinger bands are charted for a period of twenty times but most traders make these periods in a single day. Some other traders prefer short-term periods thus they prefer hours. Apparently, it is not a must to be twenty periods as it depends on the trader’s choice as some can decrease the standard deviation while others increase as illustrated in the figure bellow.

Bollinger Bands Review 1

Figure: Bollinger Band practice within a period of 20 days.

Using Bollinger Bands:
There several means of using Bollinger bands. One of the most important thing to note is if either the prices touches the upper band or the lower band it doesn’t mean to sell or buy..Sometimes prices can walk through the band .this indicates that there are clear instances where the prices may touch the lower or upper band as they break through.

The Classic M Top:
This is formed through a push to higher than a stiff reaction of sell plus the test of the previous high. Sometimes a trader may wonder if it is either in its uptrend or it has reached its resistance point. Bollinger Band is always there to give the answer to such questions. The figure below explains  how classic M Top behaves.

Bollinger Bands Review 3

With classic M Top the first high is located outside the upper band while the reaction is coming closer to the middle band while the second high is located inside the upper band. The second high can be either high or low than the first high. Most traders prefer second high then signal for selling.

Double Bottom:
In a double bottom, it easy to note where the price will fall into the first time as it touches the lower band. In case a double bottom occurs a trader will have higher chances of success in case the first low is touching the lower band then the price will move to the middle band. This has been illustrated further in the figure below

Bollinger Bands Review 2

 

As we can see, Bollinger Bands are very useful. They can also be incorporated with other indicators  if you need unique and perfect results. As they are mostly price indicators, they can be easily be merged with volume indicators for more in depth and closer. Basically, it is hard to find perfect indicators which can get you either at the top or at the bottom. Eventually, Bollinger Bands can work best especially when paired up with indicators such as chart patterns. They will help you to figure out the best trading decision in the market.

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