Forex and Some Important Facts about Bollinger Bands. | ASXnewbie.com
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Forex and Some Important Facts about Bollinger Bands.

Forex trading is today  among one of the most looked at occupations for many individuals of all ages about the world today. This is because of its great advantages over other stock markets and also because of its high profit potential; amongst these advantages you will find that it is  now very easy to access a trading platform from the better Forex broker firms thanks to the internet.

But having a good broker firm and great trading platform  only plays a small part of what is needed in order for you to make your forex trading career a succeeding and fruitful one.

You need to have the correct knowledge and methods in order to forecast with the best accuracy what the market will do next. One of these techniques that is often  used to predict the Forex market behavior is one that is founded on Bollinger Bands.

These Bollinger Bands are nowdays referred to as a  technical trading tool and  they are now very widely used in the various stockmarkets of the world (including Forex). They were created by John Bollinger in the early 1980s.

This technique was devised and was based on the need for adaptive trading bands and the knowledge that the volatility of the markets was a dynamic phenomena, not a stable one as was widely believed at that time.

Bollinger Bands consist of a chart of three curves drawn in relation to currency pairs prices. The band situated in the middle is a measure of the intermediate-term trend and is usually a simple moving average, that serves as the base for the upper and lower bands.

The interval between the upper, lower and the middle bands is determined by the volatility of the market, typically the standard deviation of the same information that were used for the moving average. The default parameter is 20 periods and two standard deviations above and below the middle band; of course this can be easily  adjusted to suit your individual requirements.

Briefly, the aim of Bollinger Bands is to supply a relative definition of high and low prices. By definition prices are considered high when touching the upper band and low when they touch the lower band. This relative definition can be used by the Forex trader to compare price actions and as a very useful indicator when the purpose of the trader is to arrive at rigorous buy and sell decisions.

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I wish you profitable trading.  :-)