Posted by forex at 12:27 AM
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1. Use the space between the Bollinger bands as a volatility indicator. When market volatility increases, the space between the bands increases. Likewise, when volatility decreases, the space contracts. Volatile markets offer more trading opportunities because there is more price movement.
2. Sell on a bounce off the upper band. When the price of a forex currency pair hits the upper Bollinger band, it is a strong indication that the market is overextended. In any market, overbought conditions may indicate that a corrective decline is immanent.
3. Look to buy on a bounce off the lower band. When the price of a currency pair hits the lower band, it indicates that the market may be oversold. Take advantage of the situation by buying in anticipation of a corrective rally.