Bollinger Bands indicator is used to identify and analyze trending markets. In a trending market this indicator clearly shows up or down direction.
This indicator can be used to determine the direction of the forex trend. In an uptrend this indicator will clearly show the direction of the trend, it will be heading upwards and price will be above middle bollinger.
In a downtrend the price will be below the middle band and the bands will be heading downwards.
By observing the patterns formed by bollinger bands a trader can determine the direction in which the price is likely to move.
Patterns and Continuation Signals
Forex Uptrend
- Uptrend In general, during an upswing, the price will stay within the upper band and the central moving average.
- Prices that close above the upper band are a sign of price continuation.
- prices can hug/ride the upper band during an uptrend
Price hugs the upper band in a forex upward.
Forex Downtrend- During a downswing, the price will stay within the moving average and the lower band.
- Prices that close below the lower band are a sign of price continuation.
- prices can hug/ride the lower band during an downtrend
