Bollinger Band

Bollinger Band
The Bollinger band consists of an upper, middle, and lower band created by John Bollinger.

Bollinger Band
Bollinger Band

The Bollinger Bands are used to measure price fluctuations above and below the Simple Moving Average (Simple MA). John Bollinger noted that periods with low volatility are followed by periods with high volatility. So when the Bollinger Bands get tighter and closer together, it can be concluded that significant price movements will occur soon.

Thus, the Bollinger Bands tight trading strategy helps to take advantage of price movements after a period of low volatility.

How does this strategy work?

The chart above shows the time of 240 minutes of the EURUSD currency pair. The Bollinger Band Indicator should be adjusted over a 20-day period with a Deviation of 2 to calculate the Bollinger Bandwidth.

When using this strategy, we are looking for Bollinger band contraction and compression in periods where the Bollinger bandwidth is around 0.0100 or 100 points.

How can this strategy be traded?

If all of the above conditions are met, it means that the price movement is noticeable, as shown in the diagram above, inside the green circle.

The Buy signal is issued when a complete candlestick forms above the simple moving average line.

The sell signal is issued when a full candlestick forms below the simple moving average line.

Set the stop loss or (Stop loss) on the maximum price (High) or minimum price (Low) of the previous candlestick or
Allocate 3% of the capital in this transaction to the loss limit, of course, use whichever was less.

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