Inside the Currency Market: Mechanics, Valuation, and Strategies

Bollinger Bands

John Bollinger recently celebrated the twenty-fifth anniversary of his Bollinger Band introduction. Its wide use in all markets attests to its success, and forex is no different because it has survived the test of time. The purpose of Bollinger Bands is to capture highs and lows on a relative basis using standard deviation to measure volatility and a moving average to measure time series.

To understand Bollinger Bands methodology is to know Bollinger's rules for use.

Bollinger Bands confirm W and M market patterns. They can be used for buy and sell decisions. Closing prices outside the bands don't necessarily mean market reversal; they may mean price continuation. Yet prices that touch the upper or lower band doesn't always translate ...