Forex Videos

This is lesson 21 of the series. The Bollinger bands indicator got its name from its inventor John Bollinger. It is used as a trend indicator and also as a trend change indicator. It is also used to indicate the volatility of the Currency markets.
In the middle we have a line, which is a Moving average with 20 periods. And the other two lines are the bands, the upper band and the lower band. They are based on the Standard deviation. The Bollinger bands can be regarded as Support and Resistance lines. If the price breaks out of a narrow channel there is a high chance of trend continuation. Whenver the price hits the bands its either a signal for a trend confirmation or a trend change. If the price hits the upper band continuosly the market is regarded as overbought. When price hits the middle of the band it would be a good idea to exit the trade.
The distance between the bands is narrow at times of low volatility and wide in times of high volatility. You can identify a sideways market when the bands run horizontally and its a good idea to buy when price hits the lower band in a sideways market and to sell when it hits the upper band.