What are Bollinger Bands and How are They Used?

  There are many strategies and analysis methods that are used to be successful in Forex. Besides the fundamental analysis that enables the interpretation of the daily data to be followed up, technical analysis methods based on drawing individual figures and past prices are at the beginning of these strategies. One of the most frequently used indicators of technical analysis is Bollinger Bands, we have already mentioned in our previous writings. Let's take a closer look at what bollinger bands are and how they are used.

   Bollinger Bands were invented by the famous trader John Bollinger. It is one of the frequently used indicators in technical analyzes applied in financial markets. It is shown by 3 lines and these lines are followed by taking advantage of moving average. Moving averages are calculated by shifting the standard deviation value up and down.

   In Forex Meta programs, Period 20 and standard deviation value 2 are chosen. The values are applied on platforms considering the optimum rates in transaction evaluation. However, you can change these values up or down according to your own.

• Medium Bollinger Band = 20 Daily Moving Average
• Upper Bollinger Band = Medium Bollinger Band + 2 Standard Deviation
• Lower Bollinger Band = Medium Bollinger Band - 2 Standard Deviation

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  The lines shown as lower band and upper band are strong support and resistance levels. The prices approaching the upper band line are approaching resistance, while the prices approaching the lower band approach to the support level. The prices approach these levels and their departure gives us an idea of ​​direction.

   For example; If prices are breaking up the middle bollinger band, We might think that the price could move towards the upper resistance, which is the next resistance level.

We can think that if the prices are breaking down the middle Bollinger band, the price could move towards the downward direction, which is the next support level.

If it breaks the upper band again, the idea that the continuation of the ascension will come, if it tries to force the upper band, but it does not, we might get the idea of going back to sells. Likewise, this rule applies in the lower band.

   

  It is possible to perform technical analysis using indicators,  but alone is not enough to make a decision.It is necessary to look at what is happening in the market during the day, to follow economic conditions and data of countries, to evaluate transactions with appropriate lots and multiple indicators, data and news should be utilized when making investment decisions.

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