How to use Bollinger band (BB) to our advantage

Hi every one


Bollinger Bands(BB):

Bollinger Bands are comprised of three lines : the upper, middle, and lower band. The middle band is a moving average, and its parameters are chosen by you.(It is always set to 20 by default though, I personally don’t change the MA number) The upper and lower bands are positioned on either side of the moving average band. You can decide the number of standard deviations they need the volatility indicator set at. The number of standard deviations, in turn, determines the distance between the middle band and the upper and lower bands. The position of these bands provides information on how strong the trend is and the potential high and low price levels that may be expected in the immediate future.

I recommend that you use(20 2 0) setting for most parts.



1.How to trade with Bollinger bands:

This chart shows the EUR/USD chart in an uptrend – depicted by higher highs and higher lows. Using the Bollinger Band indicator, the lower band is seen as a gauge of support. When price touches the lower band, traders use this as a signal to enter a long (buy) trade. This strategy works for both uptrends and downtrends. Take profit (limit) levels are generally taken from the upper and lower bands depending on trend. In this example, the upper band will be used as the take profit level.

In summary, trading the trend with Bollinger Bands is relatively simple:

• Identify the trend

• Use upper and lower bands in conjunction with price movement to identify entry points

• Use respective upper and lower band as target levels


2.How to trade with Bollinger bands:

As mentioned previously, when the bands contract volatility is low and vice versa. The Bollinger squeeze looks for breakouts above/below the band depending on trend to be used as entry signs.

Highlighted in green shows these breakouts in an uptrend. Traders will look to enter at the indicated green circles. After each entry, it can be seen that the candles are ‘walking the Bollinger‘ (following the upper band). After the breakout candle the bands expand implying greater volatility in the market.

The red circles illustrate the point at which traders will look to take profit before looking for further breakout signals.

To summarize, when trading the Bollinger Band squeeze:

• Look for low volatility (contracting bands)

• Wait for breakout of upper/lower band

• Close trade when price reaches moving average

Note that sometimes the accuracy of BB is low (like the one shown with white flash) but most of the times it works fine.


We hope that you've learn something with this post .
Have a nice day and Good luck.