If the price crosses the band upwards, traders assume a continuing upward trend - and tend to go long. On the other hand, a trend crossing the lower line is of course the signal to rather switch to the short position. In practice, this makes Bollinger Band trading very simple.
But: Inventor John Bollinger himself has pointed out that the bands alone are actually not sufficient to determine a trend in the chart with sufficient accuracy. This actually requires other parameters. Traders must keep this aspect in mind. And when choosing their trading platform, they should make sure that these parameters can be integrated into the analysis.
It is also difficult to extract the duration of a price trend from the indicator. Experienced traders, however, know that there is a sign that a movement is imminent. If plateaus form at one of the two edges, a trend reversal is likely for the observed price.
Stop Loss and Take Profit: Bollinger Trading never without a safety net
Beginners in CFD trading and Forex trading in particular sometimes overlook the fact that the Bollinger Band strategy is not infallible. The result: as soon as a supposed sell signal is read from the indicator, traders go long or short - often with a much too large position.
Many thai traders have experienced what happens then: แนวโน้มราคาไม่ได้ถือสินทรัพย์อ้างอิงหรือคู่สกุลเงินใน ดาวน์โหลด mt4 exness หันกลับไปในทิศทางอื่น. นี่คือการสูญเสียอย่างหนักและความผิดหวังอย่างมาก.
"The price trend does not hold, the underlying asset or the currency pair turns back in the other direction. This is accompanied by heavy losses and great disappointment."
Despite supposed trading signals, it is important to observe elementary basic rules with the Bollinger Band strategy. This includes being prepared for the event of a sudden trend reversal. Bollinger Band trading without a stop loss quickly backfires. With the help of the stop loss, the trading platform automatically exits a position if the price drops too much.
On the other hand, the take profit option is important for taking profits. To ensure that the platform does not exit the position too early in trading due to a rigid take profit, it is advisable to use a trailing stop. In this way, the price markers for closing the position are automatically followed.
Bollinger Band Strategy: Try it out with a demo account
The Bollinger Bands are an important indicator that every trader must know. A little theoretical knowledge is not enough to use the tool successfully in practice. On the contrary, it is essential to make the practical application of the indicator second nature. How does this work without putting a large part of the investment capital at risk? With the help of a free demo account, which many brokers make available today, this is exactly what can be done. Here, beginners experience live how prices can be influenced by fundamental data. And how this also changes the Bollinger Band.
At the same time, thanks to virtual currencies, it is possible to test how the indicator emits trading signals - and how reliable these signals are. Traders thanks to the demo account probably also realise very quickly that without the order additions such as the stop loss, seconds of shock can occur very quickly. Situations that no one wants to experience with their own money - and thanks to demo access get off lightly.