News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Market Conditions for Bollinger Bands

Market Conditions for Bollinger Bands

Richard Krivo, Trading Instructor

Instructor's Response:

 
The answer to this will best be served by an example chart…see below.
 
Inasmuch as a trader using Bollinger Bands wants to see price action moving between the upper and lower band, a ranging market best facilitates that.
 
On the chart below, we can see how trading decisions can be made as price action moves between the bands and provides buy and sell signals.
 
chart 7 22 10
 
When this historic 4 hour chart of the EURAUD pair is in a strong downtrend, however, we can see how the upper band does not even come into play. The lower band can be used minimally to determine when a retracement might occur but not too much beyond that.
 
Bottom Line: Bollinger Bands function best as a currency pair is trading in more of a sideways fashion than in a trend.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES