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Published On: Wed, Feb 6th, 2013

Bollinger Bands strategy in FX Market

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Bollinger Bands strategy in FX Market .

                     Bollinger Bands are used in Technical Analysis.This tool is proposed by JOHN Bollinger.So,he included his name in the tool that’s called as Bollinger Bands.This involves the method of trading bands.These Bands are useful to determine the higher or lower levels of the price relating to previous trades.
These Bands consist of  
  1. A Band being an N-period moving average.
  2. Upper band k-times N-period deviation above the middle band.
  3. lower band k-times N-period deviation below to the middle band.

The values for N and K are 20 and 2 in the order.And in the choice the moving average and other types of averages can be used if needed.After giving the first importance to the moving average and the second importance is to Exponential Moving Average as the second choice.Same period is used for the middle band and for calculating the deviation.

The main advantage of these Bollinger Bands is for providing the estimated high and low levels.Fairly we can say that,at  the upper Bollinger Band the price levels are high.And where as at  the lower Bollinger Band the price levels are low.This is mainly used for comparing the price action to the action of indicators to take the trading decisions.
                        Among the traders in the world wide the use of Bollinger Bands may vary.Some smart looking traders do quite opposite in the forecasts releasing situations.They simply sell when price level touches the higher level Bollinger Band and will exit when it touches the lower level Bollinger Band,sometimes at the center level of the Bollinger Bands.And even some other traders trade like this,they will buy when the price level breaks above the upper Bollinger Bands.And they do this also they will sell when price level went down below the lower Bands.Most of all this strategy is doesn’t comfortable for stock traders and option traders.This strategy fails if the market is volatile situation.
                     When the bands come close together for a period of less volatile in the stock prices indicated.If they are far a period of much higher volatile in price is identified.If the Bollinger Bands will show a slope and looks like parallel for more extended time the price level of the stock will be likely to be found to rotate or oscillate down and up among the Bands.
Most of the intelligent Forex Traders attracted to use this Bollinger Bands technique along with other different indicators to estimate the exact next level price moments.Because their decision may not be dependable on one strategy.
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