Bollinger Bands were invented by the famous trader John Bollinger. It is one of the frequently used indicators in technical analyzes applied in financial markets. It is shown by 3 lines and these lines are followed by taking advantage of moving average. Moving averages are calculated by shifting the standard deviation value up and down.
In Forex Meta programs, Period 20 and standard deviation value 2 are chosen. The values are applied on platforms considering the optimum rates in transaction evaluation. However, you can change these values up or down according to your own.
- Medium Bollinger Band = 20 Daily Moving Average
- Upper Bollinger Band = Medium Bollinger Band + 2 Standard Deviation
- Lower Bollinger Band = Medium Bollinger Band - 2 Standard Deviation
The lines shown as lower band and upper band are strong
support and resistance levels. The prices approaching the upper band line are
approaching resistance, while the prices approaching the lower band approach to
the support level. The prices approach these levels and their departure gives
us an idea of direction.
For example; If prices are breaking up
the middle bollinger band, We might think that the price could move towards the
upper resistance, which is the next resistance level.
We can think that if the prices are breaking down the middle
Bollinger band, the price could move towards the downward direction, which is
the next support level.
If it breaks the upper band again, the idea that the
continuation of the ascension will come, if it tries to force the upper band,
but it does not, we might get the idea of going back to sells. Likewise, this
rule applies in the lower band.
It is possible to perform technical analysis using
indicators, but alone is not enough to make a decision.It is necessary to look at what is happening in the market
during the day, to follow economic conditions and data of countries, to
evaluate transactions with appropriate lots and multiple indicators, data and
news should be utilized when making investment decisions.
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