If you choose Bollinger Bands to assess currency volatility as well as to identify trending Forex markets, you won’t go wrong. Recognizing price changes with the use of the bands can be part of your trading essentials to avoid pitfalls.
As a general rule, when you see that prices remain within the upper bands you can assume that they’re trending to the upside. If they’re trending to the downside, the rates will remain within the lower Bollinger Band.
Don’t assume there’s a reversal whenever you notice that the currency prices close on the upper part of the top band, or below the bottom band. As a matter of fact, the closing prices that appear above or beneath the top or bottom bands depict the continuation of a trend.
With this system, you can see that the prices can increase and ride the top band or they can decrease, thus riding the bottom band.
So what about reversals? As a trader, you should wait for the currency rates to fluctuate in the opposite direction once they touch the bands. After this happens, you may assume that a reversal is taking place. However, make certain that you notice the currency prices intersect the moving average.
In day Forex trading like in any other business pursuit, there’s much to learn. There are easy basics and then, the more complicated intricacies that add to the profit potential. With a Forex course you can learn how to trade like a professional.
