Trading Forex with Bollinger Bands

Trading forex with bollinger bands by entering and exiting a position once price hits either the lower or upper band may work for a while when price is moving up and down in a trading range. But what happens when price starts trending?

That is the problem when buying and selling currencies based on the upper and lower bands. Mathematically, it will make sense as the probabilities of price changing direction once it hits the outer reaches of the bands are increased.

To make a strategy work using bollinger bands, we need added confirmation like price resting on support and forming a double bottom before buying as shown on the chart below.

We can also further improve our success rate by waiting for confirmation by reading candlestick price patterns.

Notice price makes double bottom on bollinger bands

Notice from the above chart how a trading system of buying and selling between the bands would not have worked without the added confirmation of the double bottom AND candlestick patterns.

The idea when creating a trading strategy is to select only a few indicators. Not too many. Test a combination of them and see what happens. Read more about trading strategies here.

Himanshu Jain a successful forex trader from Tokyo explains how he uses bollinger bands in conjunction with other indicators. Read his article here.

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