Understanding The Use of Bollinger Bands in Forex Trading

Definition:
Bollinger Bands (BB) are the common chart indicators which is used to recognize the strength/volume of volatile market. Commonly, Bollinger Bands tells us whether a forex trading market is few or crowded. When the market is few, BB is narrowing. Meanwhile, when the market is crowded, BB will be widening.

If you want to know the history, formula, and all kinds about Bollinger Bands, you can read them in bollingerbands.com

The Classic Bollinger Bounce
One of the Bollinger Bands Technical Analysis in forex trading is classic bollinger bounce. The first thing that you need to know about Bollinger Bands is that the price movement has a tendency to go back to the middle (middle of BB). From this understanding, you can take the right position to get profit. From the picture above, you can predict where the next price movement will go.

If your answer is ‘down’, then it is right. The price movement will and is going down towards the middle line of BB.

What will you just learned is called Classic Bollinger Bounce. The reason of ‘bounce’ is because Bollinger bands is like a mini support and resistance. The bigger time frame that you use, the bigger range of the BB. Bollinger Bands is often used by forex traders who take advantage of swing condition (85% of the whole time) to get profit.

Bollinger Squeeze
Another Bollinger Bands Technical Analysis is Bollinger Squeeze. The meaning of Squeeze is shrinking. If the Bollinger Bands is started to shrink, it is likely to be a breakout. In a ‘squeeze’ condition, if a candlestick is going upward and passing the upper Bollinger Bands line, a breakout will happen and going upwards.

If a candlestick started to go to downward and pass the below BB line, a breakout will happen and go downward.

In the following pictures, the BB is shrinking and the candlestick is going upwards.

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What Makes a Good Forex Swing Trading Strategy?

There are many different varieties of swing trading strategies. So what makes a strategy more effective or efficient than another? For a strategy to be truly effective it must be able to correctly identify entry, exit and stop loss for any trade. Being able to correctly identify these three parameters is the foundation of a good trading strategy.

Entry conditions for swing traders may vary greatly. Some traders use indicators to signal potential trade setups. Others may be more focused on fundamental issues such as news releases and what their impact in the future may mean for any currency pair. Regardless of what or how a trader gets their signal for a trade setup, any trading strategy must have a fixed set of rules that clearly show when and where a signal is generated. Trade signals should not be left to guess work or emotions.

Once a trader has a system that clearly generates trade signals based on a number of fixed parameters, their system must also have clearly defined exit rules and stop loss guidelines. Entry into a trade is simple, but reasons for exiting must also be based on a set number of rules. Too many new traders let their emotions take control and they exit trades sooner than they should. This is why having a trading system with clearly defined exit conditions is crucial.

Good swing trading strategies should remove the need for any guess work or emotions in finding, entering and exiting trades. Trading strategies must have clearly defined rules that completely eliminate any guess work and have a set number of rules that show exactly when to enter and exit trades according to system rules.

For the best swing trading strategies information, visit the swing trading website today for all your trading information.

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Welcome To Reliable Forex Trading Secrets

What Is Forex trading?
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

The main reasons for currency dealing to private investors and attractions for short-term Forex trading are as follows:

24-hour trading, 5 days a week with non-stop access to global Forex dealers.
An enormous liquid market making it easy to trade most currencies.
Volatile markets offering profit opportunities.
Standard instruments for controlling risk exposure.
The ability to profit in rising or falling markets.
Leveraged trading with low margin requirements.
Many options for zero commission trading.

I remain Caroline Oguama
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