The Bollinger Bands indicator, its importance and how to use it in forex and stock trading

27 April, 2017 0

The Bollinger Bands indicator is one of the means of technical analysis, and it was named after its inventor “John Bollinger” in the early eighties and it is present on all MetaTrader programs. Through it, retracement areas can be expected instead of stationary levels.

The importance of the Bollinger Bands indicator

This indicator is used to determine the direction of the market, whether it is in a state of stillness and calm, or in a state of fluctuation in the price movement.

Indicator components

1. Upper limit: It is a positive standard deviation of the simple mean.

2. Middle bound: It is a simple moving average.

3. Lower limit: It is a negative standard deviation of the simple mean.

Uses of the Bollinger Bands Indicator

1. It is used to measure the volatility of prices in the markets.

One of the most important indicators that are used in determining the degree of market volatility and assessing its direction is the John Bollinger indicator. From trends, so you should pay attention if you notice the indicator moving sideways in a narrow range and because that will be followed by a strong movement in one of the directions so you must be prepared for this, and be strong of observation when you see the narrowing of the indicator’s borders as it will be followed by a strong movement.

And if the distance between the two borders of the indicator is wide, this is a sign of increased price fluctuations and therefore market volatility and instability, and this also reflects that the price has reached its peak for this, a reversal is likely to occur, and you as a trader can expect reversal areas by integrating the Bollinger Bands indicator with other indicators. momentum.

2. Bollinger bands indicator can be used as price targets.

The upper and lower bounds can be used as price targets, meaning if the price breaks through the upper boundary, then this boundary is considered a price target in addition to a support point as well. 95%.

Author
Recent Posts

Mohamed Abdel Khaleq

Professional technical and economic analyst in global financial markets since 2004, holder of an MBA from the American University in Cairo. He works as an economic writer and technical analyst for many international financial companies. He writes daily economic and technical analyzes for many Arabic and English websites specialized in the field of stock exchanges and financial markets.

Latest posts by محمد عبدالخالق (see all)