Our custom developed Forex bollinger bands tutorial. It is a moving average with two trading bands above and below it. Unlike a percentage calculation from a normal moving average, Bollinger Bands simply add and subtract a standard deviation calculation.
Standard deviation is a mathematical formula that measures volatility, showing how the stock price can vary from its true value. By measuring price volatility, Bollinger Bands adjust themselves to market conditions. This is what makes them so handy for traders; they can find almost all of the price data needed between the two bands.
Understanding a Bollinger Bands
Bollinger Bands consist of a center line and two price channels (bands) above and below it. The center line is an exponential moving average; the price channels are the standard deviations of the currency pair being studied. The bands will expand and contract as the price action of an issue becomes volatile (expansion) or becomes bound into a tight trading pattern (contraction).
A currency pair may trade for long periods in a trend, albeit with some volatility from time to time. To better see the trend, traders use the moving average to filter the price action. This way, traders can gather important information about how the market is trading. For example, after a sharp rise or fall in the trend, the market may consolidate, trading in a narrow fashion and crisscrossing above and below the moving average. To better monitor this behavior, traders use the price channels, which encompass the trading activity around the trend.
We know that markets trade erratically on a daily basis even though they are still trading in an uptrend or downtrend. Technicians use moving averages with support and resistance lines to anticipate the price action of a currency pair.
Feel free to use this indicator together with our other technical indicators (oscillators, momentum) or price action methods to maximize your trading accuracy.
The EUR/GBP 15 minute chart below displays the Forex bollinger bands tutorial in action.
Copy and paste the Forex bollinger bands tutorial into the MQL4 indicators folder of the Metatrader 4 trading platform.
You can access this folder from the top menu as follows:
File > Open Data Folder > MQL4 > Indicators (paste here)
How to remove Indicator from your Metatrader Chart?
- Select the Chart where is the Indicator running in your Metatrader 4 Client
- Right click into the Chart
- “Indicators list”
- Select the Indicator and delete