By Joe Tavenner
Bollinger bands were developed by John Bollinger, and are volatility bands drawn around a simple moving average. The concept is simple, as volatility comes into the market the bands expand. As volatility comes out of the market the bands contract. The trick is utilizing them to develop a successful strategy that makes money.
Bollinger bands can be a great addition to your forex trading strategy if you have a plan to use them profitably. They allow you to act without emotion and avoid costly mistakes. A tool, that when used properly, can help you read the market and find entries. In this article, we will consider using them to enter breakouts after a price squeeze.
When markets make a large move with lots of volume a bubble can form in the Bollinger bands on your chart. Soon, volatility subsides and price movement commonly stalls with it. The low volume period when the price does not move causes the bands to contract until the next move.
As the squeeze continues and the market stays flat, the Bollinger bands ride horizontally with price showing no buyers or sellers in the market. At some point, volatility comes back into the markets and pushes price above or below the horizontal band. At this point, the squeeze has probably ended and with it a fresh opportunity to ride the next move. Volatility has come back into the market pushing price to a new high or low providing a potential opportunity to profit.
Enter your trade as price moves past your enter point and set a stop loss and profit target. Watch the trade and change your stop loss to break even as soon as possible. Always look for reasonable profit targets and adjust them based on your past results. The most important goal is to manage the trade and not lose money. Even the best entries can lose money if you don't have a solid plan to manage the trade.
Consider paper trading the Bollinger band squeeze trade set up until you feel confident. The strategy is the same no matter the time frame you choose to trade in. In addition, the normal parameters give you a good starting point. As you have time, start changing them to best fit your timeframe and goals.
Bollinger bands can be a great addition to your forex trading strategy. Spend the time to master your entry and trade management. This article is not meant as trading advice, but a tool to provide you with educational information. Take the time to experiment for yourself and develop your own custom method.
Bollinger bands can be a great addition to your forex trading strategy if you have a plan to use them profitably. They allow you to act without emotion and avoid costly mistakes. A tool, that when used properly, can help you read the market and find entries. In this article, we will consider using them to enter breakouts after a price squeeze.
When markets make a large move with lots of volume a bubble can form in the Bollinger bands on your chart. Soon, volatility subsides and price movement commonly stalls with it. The low volume period when the price does not move causes the bands to contract until the next move.
As the squeeze continues and the market stays flat, the Bollinger bands ride horizontally with price showing no buyers or sellers in the market. At some point, volatility comes back into the markets and pushes price above or below the horizontal band. At this point, the squeeze has probably ended and with it a fresh opportunity to ride the next move. Volatility has come back into the market pushing price to a new high or low providing a potential opportunity to profit.
Enter your trade as price moves past your enter point and set a stop loss and profit target. Watch the trade and change your stop loss to break even as soon as possible. Always look for reasonable profit targets and adjust them based on your past results. The most important goal is to manage the trade and not lose money. Even the best entries can lose money if you don't have a solid plan to manage the trade.
Consider paper trading the Bollinger band squeeze trade set up until you feel confident. The strategy is the same no matter the time frame you choose to trade in. In addition, the normal parameters give you a good starting point. As you have time, start changing them to best fit your timeframe and goals.
Bollinger bands can be a great addition to your forex trading strategy. Spend the time to master your entry and trade management. This article is not meant as trading advice, but a tool to provide you with educational information. Take the time to experiment for yourself and develop your own custom method.
For more information and a free forex trading e-book go to http://bit.ly/vHrF45.
Joe Tavenner CSP, CFPS has over 15 years of experience, a bachelors and Masters degree in Occupational Safety Management and an MBA in Management. He trades forex as a hobby and has a blog full of free resources, articles and product reviews. If you are looking for more forex information go to http://bit.ly/free4u123.
Article Source: http://EzineArticles.com/?expert=Joe_Tavenner Joe Tavenner CSP, CFPS has over 15 years of experience, a bachelors and Masters degree in Occupational Safety Management and an MBA in Management. He trades forex as a hobby and has a blog full of free resources, articles and product reviews. If you are looking for more forex information go to http://bit.ly/free4u123.
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