Bollinger band indicator is a classic tool to make a profit. Those who use the indicator always prefer to use this tool since it helps the trader to execute high-quality trades. But don’t get biased thinking that the Bollinger band indicator is the only tool that can help you to make a profit. The indicator should not be considered as your prime trading tool. You can use it as helping tools so that finding the perfect signals become easier.
A group of traders always think indicators ruin the trading performance. After reading this article, you will never say indicators are a waste of time. You will be using the Bollinger band to find the best trading zone. Let’s dive deep and learn more about this indicator.
Those who are relatively new to the trading profession know the complexities associated with the trading business. To find the pivot points the traders rely on too many complex tools and often fail to predict the price movement of the asset with a high level of accuracy. But if you dig deep, you can easily develop your skills. This is where things become interesting. Instead of learning all the complex calculations, you can rely on the upper and lower band. The upper band acts as the resistance and the lower band acts as demand zone. The smart traders use this level to execute the orders and make a decent profit without any hassle.
Before you start executing the trades using the Bollinger band, you have to get access to the best introducing broker Forex. Unless you are analyzing the market data in a robust trading platform, you are not going to make any real progress. The retail traders are always losing money since they don’t know the perfect way to assess the risk factors. Most of the time they are taking aggressive steps to earn more money. Though you will get a leverage trading account, taking too much risk can blow your trading account.
First of all, find the overall market trend. Let’s say, you are going to analyze the AUDUSD pair. Based on the past trend, you need to look for a potential trading opportunity. If the past market movement exhibits bearish momentum, look for short trade setups. But if you try to use the Bollinger band in the 1 hour or 30-minute time frame, you might end up trading the minor levels. So, try to look for the resistance level in the daily period. By doing so you can easily eliminate many false signals.
Execution of the trade based on the upper and lower band is really easy. But if you forget to analyze the risk factors, you are not going to make a profit in the long run. You might have lost your trading capital in less than a month. No matter how convincing the trade setup is, you should limit the risk exposure by using advance risk management policy. Instead of taking 2-3%, lower down the risk to 1%. Though it will limit the profit factors it will also save your trading capital. Those who are smart often use the price action signals since it allows them to trade with tight stops. Incorporating a price action trading system with the Bollinger band indicator helps you to increase the lot size. However, you should demo trade the market for a few months before you decide to trade the market such a strategy.
Trading with the trend and using the Bollinger band indicator is not going to eliminate the problem of losing trades. Get ready to accept managed losses regularly. Most of the time, you will be losing trades when there is a major change in trend. However, you can also spot the major reversal by assessing the news factors. So, give priority to fundamental analysis to reduce the risk exposure.