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Forex Bollinger Bands Explained



The Forex Bollinger Bands is an indicator that is developed by John Bollinger and What Bollinger band can do for you is to help you to measure the volatility of the market.

It can tell you the current situation of the market by using its upper and lower band.

Whenever the market has low volatility, the bands will be narrow and whenever the market has high volatility, the bands will be wide.

forex/stock/gold/oil trading

Bollinger Bands Example

In this blog, I will not be going through the various sophisticated mathematical calculations for the individual tools as I find them totally useless as most forex platform that you are using is able to automatically help you plot them out.

Here is the structure of the Bollinger bands

1) The upper band - which is showing you the simple moving average + 2 x standard deviation

2) The lower band - which is showing you the simple moving average - 2 x standard deviation

3) The Simple Moving Average (SMA)

forex/stock/gold/oil trading

Bollinger Bands Explained

How to Setup Your Bollinger Bands

Personally, I always stick to the default setting for my Bollinger band which is the 20 days SMA and plus minus 2 x standard deviation for the upper and lower bands.

However you can also adjust the setting if you find the price constantly penetrating the upper or lower bands.

What Bollinger Band Can Do For You

The upper band usually indicates a resistance level while the lower band usually indicates a support level. If you take a close looks at your Bollinger band. You will find that the price usually bounce off the Bollinger band whenever it touches the upper or lower band.

With this observation, you can use the upper and lower bands as support and resistance when planning your trade.

Besides using the upper and lower bands as the support or resistance, you can also make use of Bollinger bands to help you measure the volatility of the market.

When the upper and lower bands are narrow, you are actually in a period of consolidation and when the bands are widely apart, you are in a period of strong price movement. In my next post, I will show you the various uses of forex bollinger bands in trading and how you can make full use of its feature to help you in your trading.


If you are interested to find out more about other indicators like the Forex MACD Indicator and how to trade MACD divergence, you can take a look them in this blog.


Kelvin is basically a full time forex trader. Before getting into the field of forex trading, he used to work as a process engineer in a multinational company. he was introduced to this field by one of his friend who had also quit from day job to be a full time trader today.

Please visit my website for more information.


This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.




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