Ever since Mr. John Bollinger devised his famous technique, traders have gotten better at knowing when to buy or sell currencies. That’s right; with the use of Bollinger bands you too can look at a Forex chart and predict a trend. This way you know whether to go long or go short. These bands are perhaps the most practical tool for conducting technical analysis of a currency pair.

Bollinger bands are an excellent road map for traders to view how the market may play out. Each line indicates the breadth of a moving average, thus letting you know the boundaries within which a currency will trade.

Bollinger bands possess certain features you should get familiar with. For starters, observe that a movement usually begins when one of the lines approaches another one.

Second, should you see that two lines meet you can safely assume that there’s going to be a sharp price fluctuation. If the rates remain unstable for an extended period of time, a breakout is imminent. If you’re new to the market, read further articles on tips for using breakouts.

Look out for tops and bottoms, ideal signals for shifts in trend. And finally, should the bands separate, you can correctly interpret it as a true market reversal, not a temporary correction.

The use of Bollinger bands came into existence in the 1980s. Ever since, international Forex traders have incorporated them into their daily strategies. But despite their utility, you must not ignore other signal indicators.

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