The forex trading business has enormously attracted a lot of people from all over the world. Talk of professions, now this has become one and someone will take their whole day and night trading in the forex market. This business is running all through and one could make a fortune out of it if they get to learn what it is all about.
Three Bollinger Band Strategies Used in The Forex Market
There are various strategies that a forex trader could learn include to perfect their skill in the forex market. In this business, one could lose or win but it comes with how one strategizes on how to play this game. The Bollinger Band strategy was developed by John Bollinger.
Bollinger bands are defined as market indicators that are technical to a forex trader. These indicators are used to measure the market uncertainty on if one will win or lose. Three lines are comprised of the market indicators.
The three lines are the upper line moving above the price, the moving line in the middle, and the lower line which comes below the price. It is, therefore, necessary for a forex trader to get to know these three Bollinger band’s strategies.
Trend Trading Strategy
Prices in the forex market rise and fall periodically. Trend trading is a strategy under the Bollinger band that signals a forex trader by having a strong trend upwards and when the prices go lower, the signal is a strong trend downwards.
Bollinger bands under the trend trading strategy help a forex trader assess how the prices are moving, are they taking an upward or downward trend. It is key that a forex trader takes keynote of this and makes use of the trend trading strategy to be in his or her A-game while trading.
This is another Bollinger band strategy that looks into the breakout of the prices in the forex market. The breakout strategy is when two currencies in the forex market breakout for instance the Euro and the dollar.
This strategy will warn a forex trader when the prices go on a downward trend on when to exit the market and prepare themselves for a totally new entry.
This strategy is one of Bollinger band’s rewarding strategy. It indicates to a trader in the forex market when there is low market uncertainty. As the word suggests, squeeze, this strategy is applied by a forex market trader when the market prices move so aggressively and then divert sideways in a seemingly tight consolidation.
The diversion will force the forex market trader to make a reversal or change in how the markets are trending. A few instances where a trader makes changes in how he plays the game are when the prices after a break out are when there is a break on the lower Bollinger band, this signals a trend downward hence signals a trader to sell.
In cases where the prices break the upper Bollinger band, there is a possibility of having a trend upwards, hence a trader should buy from the market. Another way to use the squeeze strategy of the Bollinger band is to set a stop loss of the congestion side. Last but not least ensure that you set profits that are common to know when prices divert back to the middle band.
Strategies assists one have guidance in all that they get themselves into. If you win or lose all draws down to how one strategized his game and this also applies in the forex markets. If you are in the forex trading business, you should get to use the trend trading, breakout, and squeeze strategy to win in the trading game.
The Bollinger bands tend to widen when the market uncertainty or volatility increases and when the market falls, the contract. Bollinger bands as well assist a trader to know how to trade in the forex market.
For instance, when the trends go downwards it is a signal to the trader to sell and when they move upward, they then can buy.