- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Share this
Are you fond of Price Action trading?
How do you usually carry out your price action trading?
Do you use candlestick patterns and chart patterns alone?
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Did you know that certain chart analysis tools such as Bollinger Bands can also help you to read price action?
Well, so many questions there right, and all I am saying is that Price action is multifaceted.
While some traders may purely rely on candlestick and chart patterns, others may find some chart analysis tools helpful.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
One of the most commonly used and the best chart analysis tools helpful in price action trading is the Bollinger bands indicator.
In this post, we are going to explore how to read price action with Bollinger bands.
Before we go deep though, let us define the terms.
What is Price Action?
Price action is a trading technique that allows a trader to read the market and make subjective trading decisions.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Trading decisions in this technique are based on the recent and actual price movements, rather than relying solely on technical indicators.
What that means is that traders have limited use of technical indicators but heavy reliance on the recent and actual price movements.
It has been said time and again that traders need to consider what the market is doing rather than what indicators, which may lag, are doing.
Such is the entire rationale behind price action trading.
Have you understood what price action entails?
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Let us now define Bollinger bands.
What are Bollinger Bands?
Bollinger Bands is a technical indicator that consists of three lines namely:
- The Middle Band Line = N-period simple moving average (SMA).
- Upper Band Line = N-period SMA + (N-period standard deviation x multiple).
- Lower Band Line= N-period SMA – (N-period standard deviation x multiple).
The standard value for N is 20. And the usual multiple applied is 2.
The Upper and Lower band lines form an envelope around a moving average of price (middle band line).
The width of that envelope depends on the price volatility (standard deviation).
That is so because the upper and lower band lines expand and contract in respect to the middle band line, according to the standard deviation of past price action, otherwise known as market volatility.
The expansion and contraction of the upper and lower band lines in respect to the middle is the key to using the tool to read price action in the context of the market’s recent volatility.
Price action traders need to watch how the Bands interact with price action to be able to obtain valuable trading information from the tool.
Basically, when market volatility is low, the Bollinger bandwidth will be narrow.
On the other hand, the Bollinger bandwidth will expand or be wide when market volatility is high.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
The standard deviation of the upper and lower band lines from the middle line decreases with a decrease in market volatility and increases with an increase in market volatility.
How to Read Price Action with Bollinger Bands.
We have uncovered what price action and what Bollinger bands are.
Now, let’s focus on unearthing how you can use the Bollinger bands technical indicator to read price action.
To begin with, understand that Bollinger bands are easy to use to assess price action.
There are three major ways in which Bollinger bands can be used to read price action.
We shall dwell on the three as we discuss them in detail. Here are the three ways in which Bollinger bands can be used to read price action:
- Establishing a Ranging Market with Bollinger Bands.
- Establishing Breakouts with Bollinger Bands.
- Identifying Outlier Bars with Bollinger Bands.
-
Ranging Market with Bollinger Bands.
Primarily, it is not Bollinger bands that will tell you that the market is ranging.
You will have to make a prior observation to establish that the market is neither trending upwards nor downwards but sideways.
That will mean that the market lacks enough volatility to move in a sustained manner either upwards or downwards, trapping it within a range.
You can then use Bollinger bands to trade such a range, but then you ask how.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
In such a sideways market, you will realize that the price behaves in such a way that price bars reverse once they hit either the upper or the lower band lines.
To make it even more precise, you will realize that there are definite support and resistance levels which the sideways market seems to respect.
Once a price bar comes to a point of resistance that happens to coincide with the upper band line, then the price reverses downwards.
On the flip side, once a price bar comes to a level of support that happens to coincide with the lower band line, then the price reverses upwards.
Another very important thing to note during such a scenario is that the bandwidth of the Bollinger band indicator will be narrow.
The standard deviation of the upper and lower band lines from the middle line will be reduced due to low volatility. Thus the bandwidth will be narrow, unlike in other cases as we shall see later.
Trading the Range with Bollinger Bands.
Is it not so easy to trade in such a market really?
It definitely is, because all you need to do is to fade moves with bars that bounce off the upper or lower band lines.
Buy with a limit buy order as the price bars hit the lower band line.
For this trade, a proper exit is at the level of the opposite upper band line.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
On the other hand, sell with a limit sell order as the price bars hit the upper band line and target to exit at the opposite lower band line.
It is not enough to rely on the fact that the price will definitely reverse after hitting either band line though.
You can use other confirmatory methods such as bullish candlestick patterns before a buy or bearish ones before a sell.
Lastly, on this point, you might be asking when the best time to trade these kinds of setups is.
Markets usually range before the release of critical economic data.
Therefore, if you are well versed with the release of economic news, make sure to look for ranging markets before such releases and make use of the Bollinger bands tool to trade the range.
-
Breakouts with Bollinger Bands.
This strategy involves a combination of Bollinger bands and what price bars are doing which will then confirm that the market is up to a breakout.
So how do you establish a breakout using the Bollinger bands technical indicator? Simple.
Once price bars begin to push against the upper band line and not reversing downwards but continuing upwards, then such will most probably be an upward breakout.
On the contrary, if price bars begin to push against the lower band line and do not seem to reverse but continue downwards, then such will definitely be a downward breakout.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Scenarios like these will definitely be accompanied by an expansion or widening of the Bollinger band indicator bandwidth.
What else do you expect when the price is pushing against either the upper or lower band line sustainably in one direction?
What else, if not an expansion of the bandwidth which had been narrow?
Bollinger band expansion will happen as the standard deviation of the upper or lower band line from the middle line increases due to an increase in volatility upwards or downwards.
Before you can jump to conclusions though, first be sure that candlesticks pushing against the upper and lower band lines close beyond such lines.
Meaning, for a successful upward breakout, candlesticks pushing against the upper band line must close above such a line.
And, for a successful downward breakout, candlesticks pushing against the lower band line must close below such a line.
Trading the Breakout with Bollinger Bands.
So how do you trade such breakouts shown by the Bollinger bands tool?
It is very simple if you already know that upward breakouts are bullish signals while downward breakouts are bearish signals.
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Buy when the price breaks above the upper band line and continues upwards and sell when the price breaks below the lower band line and continues downwards.
For the buy position, you must wait for a candlestick to close above the upper band line and a candlestick to close below the lower band line for the sell position.
What about the profit targets?
Ride the forming trend until you see signs of weakness in an upward breakout or signs of strength in a downward breakout.
Breakouts usually result in marked price moves in the direction of the breakout and so traders should ride the trend to gain maximum results.
Is it not also useful to confirm the breakout with other setups?
Look for bullish candlestick patterns before a buy and bearish patterns before a sell.
-
Identifying Outlier Bars with Bollinger Bands.
Under normal circumstances, the price should remain contained within the confines of the Bollinger band’s envelop.
If it has to move outside the envelope of the Bollinger bands tool, then at least not an entire price bar, but just part of a price bar which must have the other part contained within the Bollinger band’s bandwidth.
So, knowing what you know, what do you make of a scenario where a whole bar is entirely outside the confines of the Bollinger band’s bandwidth?
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Such a bar is what we call an outlier bar.
An outlier bar is a candlestick whose whole dimension lies outside the Bollinger bands tool, either above the upper band line or below the lower band line.
What significance is attached to outlier bars?
Basically, prices cannot stay beyond the Bollinger bands for long.
Meaning, if an outlier bar forms above the upper band line, then it is expected that the price will soon fall back to the bandwidth of the Bollinger bands indicator.
On the other hand, if an outlier bar forms below the lower band line, it is expected that the price will soon rise back into the bandwidth of the Bollinger bands indicator.
Trading the Outlier Bar with Bollinger Bands.
What should we do with the above information?
If you are fond of trading price reversals, you should rejoice every time an outlier bar comes up.
That is because it spells a looming reversal in the direction opposite where it forms on the Bollinger bands indicator.
Expect a bullish reversal setup when an outlier bar forms below the lower band line.
Conversely, expect a bearish reversal setup when an outlier bar forms above the upper band line.
Buy when an outlier bar has formed below the Bollinger band indicator. On the other hand, sell when an outlier bar has formed above the Bollinger band tool.
Do you need a confirmation before entry?
As with any other reversal setup, you need to obtain other supporting signals before any entry.
Never give so much attention and weight to a setup in isolation.
Bullish and bearish candlestick patterns are good confirmatory tools to use for this setup.
Outlier Bars as Exit Signals.
Outlier bars do not only give entry signals.
They can also serve as exit triggers by indicating that a reversal is lurking in the direction opposite your trade.
When trading, exit that trade before a reversal comes up and all your gains are wiped out.
Say, for example, you were fading a sideways market and had a buy trade running.
An outlier bar then forms above the Bollinger bands indicator. Such serves as a signal to exit the trade.
On the other hand, did you have a sell trade running and an outlier bar formed below the Bollinger bands?
That’s a signal to close that trade.
Final Thoughts.
As it is clear from the above discussion, price action may not entirely depend on candlesticks.
In some instances, you need proven tools which can give life to your price action trading.
One such tool is the Bollinger bands indicator.
Bollinger bands indicator breathes life into your price action analysis, enabling you to read price action with more precision.
Did we leave out any Bollinger bands trading strategy? Tell us about it in the comment section.
Happy trading.
Share this
- Start trading with $1
- Earn up to 95% profits
- Fast payments
- $10 minimum deposit
- $10 minimum withdrawal
Recent Posts
You Will Become Rich Quickly if You Live in One of These 6 Countries.
Where in the world is it easiest to become rich? While so many people think that to become rich you’ve got to live, work, and do business in Iceland, Sweden, ….
You Can Make $274 if you Invest $100 Ten Times With a Winning Rate of 70%
Quite so often we receive WhatsApp texts or even telegram messages of traders asking, “how much will I make if I invest $100 in Olymp Trade?” While it is easy ….
XM Seminars for 2020 | Register a Real Trading Account to Book Seat
XM Global Ltd operating under the business trading name XM is a securities service provider licensee regulated and authorized by the International Financial service commission (IFSC) in Belize under the ….
XM MT4 | How to Make Money Trading Forex on Your Smartphone
Did you just register for a Forex trading account – which by the way, you hope to use to make so much money online but are still stuck wondering what ….
XM Global vs Olymp Trade | Which Broker to Join?
XM Global vs Olymp Trade, which broker should you sign up for? The real question should be, between Forex trading and Fixed Time Trading, what’s best for a beginner? Tell ….
XM Global No Deposit Bonus Forex! XM Forex $30 Bonus
COLWMA (City of London Wealth Management Awards) winner of Best FX Service Provider 2023, XM Forex is one of the best Forex brokers with a no deposit bonus globally. The ….
XM Forex: How Does Forex Trading Work?
To understand how Forex trading works, we must first understand what Forex is. And what is Forex you ask? Forex, also known as foreign exchange or FX, is the global ….
XM Forex Bonus $30 – How to Start Forex Trading Without Money
One of the reasons why most new traders fail to go past the demo account is the fear of losing money trading on a real account. But what if I ….
XM Forex 10th Anniversary Promo | Up to $1,000,000 to be Won in Prizes
Hey there,Do you want to raise so much money so fast for Christmas? How much do you wish to raise?Ksh. 50,000, €1,000, ₽2,000, ₹4,000,… or $10,000?Well, if your budget falls ….
XM Broker: Why is Forex Trading Popular?
There are so many reasons why people trade Forex. Some of these reasons also double up as the advantages or benefits of Forex trading. And what are these benefits you ….
Broker Comparison
Top 5 Binary Options Brokers With $10,000 Demo Account
Binary options trading is fast becoming popular in the world and with this popularity the urge and to find the best broker to trade with. But when we talk of ….
Tips to Becoming a Forex Millionaire in Kenya
Most people in Kenya have turned to forex trading to earn an extra coin. To start trading forex though, you need to have an account that will hold your money ….
SabioTrade: Get Funded and Withdraw up to 80% Profits
Are you looking for a way to trade Forex with a funded account and withdraw up to 80% of your profits? If so, you might be interested in SabioTrade, a ….
Quotex vs Olymp Trade. Which Broker to Sign up With?
Quotex vs Olymp Trade which broker should you sign up with? This is a common question that we get all the time, especially from newbie traders who want to sign ….
Quotex Broker Regulation Vs Olymp Trade Regulation
Quotex Broker is a binary options broker that offers access to its trading platform globally to traders who’d like to make money trading in shorter time frames. Just like Quotex, ….
Nigeria Forex Millionaires And Their Forex Strategies
Forex trading has spread to several parts of the world and is legal in Nigeria, and Africa. However, it operates within a gray area. Subsequently, the Central Bank of Nigeria ….
Is Qx Broker Among The Best Binary Options Brokers
Binary trading is one of the easiest and safest ways to trade online. It is also the fastest-growing form of investing. Binary trading is one of the easiest ways to ….
IQCent Broker Review With User Opinion, Legit or Scam?
Do you want to start trading with IQcent and don’t know if to trust them or not? Welcome to our comprehensive review of IQCent, the online trading platform that has ….
IQ Mining Review Plus Users Opinion. Legit or Scam?
IQ Mining is a dual-purpose platform, serving as both a cloud mining hub for cryptocurrencies and a broker for Forex and binary options trading. Its efficient utilization of smart contracts ….
Forex Millionaires in South Africa and How they Make Money
Last week, we started a new series of listicles on this blog. Our objective? To explore, discuss, and reveal the faces of forex millionaires in the countries where forex is ….
Business Ideas
What is the Best Business to Start in Kenya?
Kenya is a great place to start a business. The best type of business may be different for you, depending on your skill set and what you are looking for ….
What Business Ideas Make The Most Money
Are you an aspiring business entrepreneur? Check out our list of the most popular business ideas in 2024. People venture into the business world for different reasons. Some because they ….
What Business Can I Start With 2k In Kenya In 2024?
Kenya is a great place to start a business. The economy is growing, the population is young and there is a lot of opportunity for entrepreneurs. However, starting a business ….
Top Business Ideas that Will Make 375 SAR Daily in Saudi Arabia in 2024.
It is common knowledge that Saudi Arabia is the world’s greatest oil producer. Around 25% of the world’s petroleum reserves are processed in the country. According to statistics, Saudi Arabia’s ….
Top 50 Online Shopping Sites in India.
You must have found yourself ordering a thing or two from an online store and they delivered to your preferred address, right? Now that is the new fashion of doing ….
Top 50 Most Profitable Businesses in Kenya
Ain’t it not easy to say I want to start a business in 2024? Of course not. You have to do your due diligence: come up with a business idea, ….
Top 50 business ideas for All Ages {Online and Offline Ideas}
Many people desire to venture into entrepreneurship for different reasons. For sure, being your own boss, working from your home, garage, or office, offers total control and satisfaction. You can ….
Top 5 Instagram Businesses to Start
Instagram is an amazing photo and video sharing app that we use to connect to friends and family online. Interestingly, Instagram is as much a great place to start your ….
Top 30 Best Businesses to Start in Eldoret Town
Would you like to start a small business in Eldoret town? Which business do you have in mind? Do you have data to back up its profitability and to maybe ….
Top 20 Small Businesses For University Students In Kenya
Are you a university student in Kenya and looking for small business ideas to start? You are in the right place. In this article, I will show you the #20 ….
Make Money
Works at Home: 30 Ways to Make Money Fast (Online And Offline)
No matter what your situation is, there’s a side gig for you. Whether it’s to make a little extra cash or help solve an emergency issue, having a backup plan ….
Will Shiba Inu Coin Keep Making Investors Rich in 2024?
The Shiba Inu Coin has been one of the most popular crypto success stories since 2018. This meme-based cryptocurrency moved to its highest in just a few years making it ….
Which TikTok Star Will Have the Most Followers in 2024?
TikTok is a social media app that has taken the world by storm. It is a platform where users can share short videos of themselves. The app has been downloaded ….
Which Freelancing Site Should I Visit To Make Money Coding?
Freelancing is the best way to make money because it allows you to work on your own time and set your own schedule. You can take jobs that are local ….
Where to Get FREE NFTs: 11 Easy Ways to Do It
Non-fungible tokens (NFTs) are all the rage right now. These unique digital assets are quickly becoming a staple in the world of blockchain gaming and collectibles. The best part about ….
What’s The Best Business to Start in Kenya in 2024?
There are many businesses that you can start in Kenya in 2024. However, not all of them will be successful. It is important to do your research and find a ….
What No One Says About Olymp Trade! Put Together in a Video.
Could this be you? You opened an Olymp Trade account. Made a deposit. Traded on a live account for the first time. The outcome? You lost your first $10 deposit. ….
What is the Easiest Way to Make Money Online in Kenya in 2024?
There are thousands of ways you can make money in Kenya. Some of them require no skill or experience whatsoever, others? You’d need skill and experience to do with success. ….
What is The Easiest Way to Make $100 Today?
If you’re already making money online, skip this post. If you’re not already making any money online keep reading. Because the methods that I’m about to show you in this ….
What is The Easiest (Non-Scammy) Way to Make Money Online?
Making money online can seem like a daunting task. There are so many scams and get-rich-quick schemes out there that it’s hard to know what is legitimate and what isn’t. ….
Quotex Tutorials
What is Quotex? Quotex Trading Course for Beginners
Quotex is a cutting-edge digital options trading platform known for its user-friendly interface and numerous tradable assets, including OTC pairs, traded 24/7. The Quotex trading platform accommodates traders of all ….
Try This Quotex 1 Minute Strategy for Fixed Time Trades
While binary options trading is easy and only requires traders to choose between two different outcomes, it isn’t always profitable without a strategy. My honest truth, You can lose so ….
Top Traders on Quotex ++ Earnings And Strategies
Quotex, the most popular trading platform in 2024, has seen a surge in popularity in recent years. With more and more people looking to make a quick buck, it’s no ….
Risk Management: Trading Course for Beginning Quotex Traders
Risk management is an important discipline that traders must understand and implement if they want to protect their capital and improve their potential for profits. In other words, without risk ….
Qx Broker: How to Register with Quotex, Quotex.io in 2024
In order to start trading on the Quotex broker platform, either on the demo or live account, you must create an account. If you are doing this for the first ….
Qx Broker : How to Fund Quotex With Instant EFT in SA
Are you a South African trader looking for a reliable and efficient platform to deposit money and start trading with? Look no further than Quotex! With the addition of the ….
Quotex, Qx Broker 80% Weekend Bonus Promo Code
Welcome to the exciting world of trading! If you’re looking for a reliable and user-friendly trading platform, then look no further than Quotex.io. Qx broker is today giving out trading ….
Quotex Withdrawal Problem? Use This Other Method
Are you looking for a reliable and profitable binary options trading platform? Do you want to join thousands of traders who are making money online with Quotex? If yes, then ….
Quotex Weekly Tournament: Up to $10,000 in Prize Money
Every other month, the Quotex trading platform allows its users to participate in trading contests and earn more money. One such contest or tournament is the Quotex weekly tournament with ….
Quotex Trading Course for Beginners: Market analysis
Once you create a demo account in Quotex to start trading, you will notice that the platform has some type of chart. Generally, trading platforms have 4 different chart types ….
XM Tutorials
How XM Trading Works in Kenya
If you went to Google and searched, “how XM trading works” then chances are, you have never traded before, you don’t have a trading account and most importantly, you want ….
How To Trade With XM Forex.
So, you have just created a trading account in XM Forex and completed the account opening process successfully and now you are wondering, what next? How does Xm trading work? ….
How to Trade on XM Even on Weekends
Trading the financial markets via a broker like XM means getting access to real-time pricing of the financial assets when you want to trade. But, as we all know, the ….
How to Open a Trading Account With XM in Kenya.
If you are reading this post then chances are, you are convinced that Xm is the best broker for retail Forex, both locally and globally. And the truth is, XM ….