How to Use Bollinger Bands in Day Trading?

Trading | 2 months ago


How to Use Bollinger Bands in Day Trading? - tradeglobalmarket

Forex Trading involves the buying and selling of currencies with the view of making a profit. A trader uses different trading strategies with the available data to forecast the rise or fall of the currency in order to maximize the profit. In this article we will discuss about the Bollinger Bands trading strategy.

Bollinger Bands trading strategy

We will discuss how to use this strategy for trading in any timeframe, when to buy, when to sell and how to take profit. Bollinger band strategy is a trading strategy that uses the twenty-period moving average of the price for trend direction. However, we can customize the settings according to our needs. Bollinger bands provides good measure of volatility of the instrument you are trading and we can use this to form the basis of a day trading or swing trading system for forex trading.

How to adjust the Bollinger bands settings?

How to adjust the Bollinger bands settings?

Prior to start trading with Bollinger bands, one must adjust the settings. The Bollinger bands is made up of three lines, top band middle band and lower band. For good results, set the top line with two standard deviations from the middle line. The middle line is a 20 period moving average and the lower line is adjusted with two standard deviations to the downside from the moving average.

What is the best time frame to trade with Bollinger bands?

One can use the Bollinger band strategy on any time frame but a higher time frame trade setup is often more reliable. So, one must use the Bollinger bands with hourly or daily chart.

When to place the buy order?

When to place the buy order?

If price is moving above the 20 period which is the middle band, then consider the market is in an uptrend. You must place the buy order at that point. Stay in the trade as long as this condition is satisfied. You can place your stop loss below the low of the entry signal candlestick.

When to exit the buy order?

Exit the long position (square off) when price starts moving below the 20 period which is the middle band.

When to place the sell order?

When to place the sell order?

If price is moving below the 20 period which is the middle band, then consider the market is in a downtrend. You must place the sell order at that point. Stay in the trade as long as this condition is satisfied. You can place your stop loss above the high of the entry signal candlestick.

When to exit the sell order?

Exit the short position (square off) when price starts moving above the 20 period which is the middle band.

 

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