Bollinger bands are a powerful technical indicator created by John Bollinger. The indicator is also not a lagging indicator because it always adjusts to price action in real time.
Some traders will swear that solely trading a Bollinger Bands strategy is the key to their success.
Bollinger bands are constructed by adding and subtracting a multiple of the standard deviation from a moving average.
By default, the Bollinger Bands are set to 2.0 Standard deviations.
However, we suggest setting them to 2.5 Standard Deviations to make them wider and capture more price action.
With the 2.5 standard deviations, 99% of all price action falls between the two bands, which means that a violation of the outer bands becomes a much more meaningful signal as we will see.
The center of the Bollinger Bands ® is the 20-period moving average and the perfect addition to the volatility based outer bands.
As you can see above, the Bollinger Bands alone can provide a lot of information about trend strength and the balance between bulls and bears.
Of course… There is more than one Bollinger bands trading strategy.
The versatility of the indicator allows you to tailor your trading with Bollinger bands to a variety of different trading approaches.
The EURUSD Bollinger Bands Breakout strategy is the combination of Bollinger Bands and Trend Momentum indicators.
- Best Time Frames (highest accuracy): H1 and H4
- Most Recommended Currency Pairs: EURUSD
- Bollinger Bands
- Heiken Ashi
- QQE ADV
- Booster Power
- Prices steadily trend within the 20 periods moving average and the upper Bollinger Band line with frequent tests to the upside, indicating an UPTREND in prices.
- Price breaks above the upper band
- Heiken Ashi candles blue color
- The blue line QQE ADV cross above the red line
- The blue line Booster Power cross above the red line
- Prices steadily trend within the 20 periods moving average and the lower Bollinger Band line with frequent tests to the downside, indicating a DOWNTREND in prices.
- Price breaks below the lower band
- Heiken Ashi candles red color
- The blue line QQE ADV cross below the red line
- The blue line Booster Power cross below the red line
As you see Bollinger Middle Band works very well with the CONTINUATION SIGNALS when there is an ongoing strong trend.
- In an uptrend, continuation signals are formed when the candlesticks go down, retest Bollinger Middle Band, and then go up again.
- In a downtrend, continuation signals are formed when the candlesticks go up, retest Bollinger Middle Band and then go down again.
Taking the continuation signals are much safer than the reversals unless you make sure that the trend is really close to reverse and is already exhausted.