Let talk about Bollinger Bands.

Is Bollinger Bands a very good indicator to usehttp://forexfactory.com/images/icons/icon5.gif
most especially when it touches the lower band,i go long and when it touches the upper band,i go short.
Please let talk about it,comments welcome.

I would suggest you google it, and then go to www.babypips.com for free lessons on the basics of FX, and also have a read in the beginners section of this site. Theres not many people making their fortune trading the way you just described. Much to learn......

'As one grows older they realise how little they actually know'

LG

Agreed.

To speed up your learning curve, it's not so clear cut as that. Bollinger bands are an envelope that goes hand in hand with a moving average. They compress and expand dependant on the price and moving average, and represent oversold (bottom line) and overbought (top line) conditions..theoretically. In reality it doesn't work like that, as first off not everyone uses bollinger bands and second of all, the markets are much more complex then that. They are an indicator and as such, represent things you see on a price chart with nothing additional added to it. They can be a useful tool if you know what you're doing but they're not a primary way to trade. You will almost certaintly LOSE money if you trade the way you just spoke of. Do not do it.

I am not sure whether this is meant to be a joke. If trading FX is that simple, anybody can be a millionaire trader overnight. Or maybe he has found a magical formula that nobody has discovered.

In combination with other indicators the BB can be useful in timing trades..as to when to put money to work. As they condense, if you get other buy signals, sometimes BB can give you an indication if there is move imminent or if perhaps waiting might be in best interest. Since trading doesn't pay by the hour, if you get in when bands are tight, you might expedite the trade..win or lose.

John Bollinger has a book, "Bollinger on Bollinger Bands". There he explained 15 Basic Rules and rule # 15 is " Tags, of the bands are just that - tags, not signals. A tag of the upper Bollinger band is not in and of itself a sell signal. A tag of the lower Bollinger band is not in and of itself a buy signal". However, he did explained in the book a system that uses a tag of upper and lower bands with the use of other indicators to predict a high probability reversal.

Bolinger bands work great in a ranging market, but try trading it in a trending market, you'll go broke!!

As has been already said, BBs show how far statistically price lies away from a mean. The factory setting is normally 2 standard deviations away from a 20 period simple moving average (SMA).

* When price moves into sideways congestion, BBs constrict accordingly. The channel created by the BBs may be too narrow to trade safely.

* Occasionally, price violently breaks out of the congestion. It will pull the nearest BB (upper or lower boundary) sharply along with it, forming a large "bubble". When price settles down at a new level, the nearest BB reverts back to shifting sideways, possibly indicating that it's time to take profit.

* During a prolonged uptrend, price generally spends most of its time in the upper half of the BB. The BBs follow price steadily upward. During pullbacks in the trend, price occasionally finds support somewhere near the median point. If price breaks the lower BB boundary, the trend may be over. Vice versa for a downtrend.

* When price moves sideways, BBs are a useful "overbought"/"oversold" indicator, i.e. when price reaches the upper and lower boundaries, respectively. A likely happening is a reversal to somewhere near the opposite boundary. If price, having reached the upper boundary, returns to the upper boundary without having entered the lower half of the BBs, it could signal the start of an uptrend. Vice versa for a downtrend.

As has been said, like all indicators, BBs are little more than a useful tool, and should be used in conjunction with price action (PA), and support resistance (S/R), i.e. prior S/R levels, Fibonacci retracements and/or floor trader pivots. And also while analyzing multiple timeframes.

David