Bollinger Bands is one of the most important technical indicators in foreign exchange trading. It has multiple functions, is very effective and convenient to use, and is very flexible to use. Therefore, it is loved by professional investors and is also the most commonly used in the international financial market. One of the technical indicators.
The Bollinger Band is composed of three lines, which are the upper track of the Bollinger Band, the middle track of the Bollinger Band and the lower track of the Bollinger Band. The middle track is actually a moving average. The general period is 20, and the upper and lower tracks pass through the middle track of the Bollinger Band. Calculated by adding or subtracting 2 times the standard deviation.
Bollinger Bands Trading Strategy
set indicators
The standard Bollinger Band formula sets the middle line as a 20-day simple moving average (SMA), while the upper and lower bands are calculated based on market volatility (standard deviation) relative to the SMA .
The standard configuration of the Bollinger Bands indicator is as follows:
Middle track = 20-day moving average (SMA)
Upper line = 20-day SMA + (20-day standard deviation x 2)
Lower line = 20-day SMA - (20-day standard deviation x 2)
The standard Bollinger Bands have a 20-day period, setting the upper and lower bands at twice the deviation from the middle line. This is done to ensure that at least 85% of the price data will fluctuate between these two bands, but it is also possible to adjust the setting size according to different needs and trading strategies.
Long and short settings for Bollinger Bands trading
Before introducing this strategy, you need to understand the following points:
1. If the price breaks through the midline (20-day SMA), the market is in a downtrend;
2. If the price breaks through the middle line, the market is in an upward trend;
3. You must wait until the price touches the middle line before placing an order;
4. The upper and lower rails of the Bollinger band can be used to set the take profit level.
Short (sell) setup
1. The price is below the middle rail, and then rises to touch the middle rail;
2. When the price touches the middle line, place a sell stop order about 3-5 points below the candle that touches the middle line. Make sure to wait for the bearish reversal candle to form before placing an order.
3. Place your stop loss anywhere from 5-10 pips (or more) above the high of the bearish candle.
Example:
Take profit setting :
Close short positions when the price falls back and touches the lower Bollinger band;
Use the distance traveled by the price from the beginning of upward movement to the final touch of the middle track, as shown in the blue dotted line in the figure above, and set the take-profit position within this range;
· It is also possible to use the previous swing low (bottom) as a take profit level.
Long (buy) setup
A long setup is the exact opposite of a short setup:
1. The price is above the middle rail (the market is rising), and then falls to touch the middle rail;
2. When the price touches the midline, place a buy stop order about 3-5 points above the midline candle. Make sure to wait for a bearish contra-bullish candle to form before placing an order;
3. Place your stop loss anywhere from 5-10 pips (or more) below the low of the bullish candle.
Take profit setting:
· When the price rebounds and touches the upper line, close the long position;
Use the distance traveled by the price from the beginning of the downward trend to the final touch of the middle track, and set the profit-taking level within this range;
· Use the previous swing high (top) as the target take profit level.
Advantages and Disadvantages of Bollinger Bands Trading Strategy
Advantages of the Bollinger Bands trading strategy:
Indicates the position of support and pressure; when the exchange rate reaches the upper line of the Bollinger Band or even exceeds the Bollinger Band, there will be obvious pressure to prevent the exchange rate from continuing to break through upwards. This exchange rate is a relatively high position in the short term.
It shows overbought and oversold; some traders will wait until the exchange rate breaks through the Bollinger Band and then combine other technical indicators to judge that the current exchange rate is in an overbought state, and short here in the hope of reaping the next callback, and the exchange rate breaks through When the Bollinger line is below the track, it is combined with the oversold indicators and traded.
Indicates the trend; the short-term opening and closing of the Bollinger Bands and the direction of the Bollinger Bands can all show the current situation of the overall exchange rate market and the possible trend of the rewards. It is recommended to trade when the Bollinger Bands are relatively stable as a whole, so that the odds of winning It will be higher!
It has the function of a channel; most of the K lines move between the upper rail of the Bollinger Band and the lower track of the Bollinger Band, which is the channel function of the Bollinger Band, and the channel width of the Bollinger Band will vary with the trader's settings. For example, the Bollinger Band channel with deviation setting 2 is obviously narrower than the Bollinger Band channel with deviation setting 3.
Disadvantages of the Bollinger Bands trading strategy:
· In a strong trending market, the price will follow the upper/lower line. Using Bollinger Bands at this time may stop losses frequently.
· Do not enter market orders. Based on the reversal candlesticks seen, it is best to use sell/buy stop orders.
Huichacha Profile
1. If you want to quickly check the compliance of the platform, you can download the Huichacha APP, which is convenient and simple to operate, and can effectively prevent being cheated to a greater extent.
2. If you encounter a black platform by chance, or encounter injustice, Huichacha is willing to provide you with professional help. Huichacha Customer Complaint Center, exposure, consultation, and complaints will meet your needs and do our best to provide you with help.
3. If you need instant consultation and answers to foreign exchange platform questions, you can directly search "hcc-kf" on WeChat to add online customer service friends for immediate consultation .
Add
