- PPF Points
- 2,039
As a forex scalper, one of the best ways to use Bollinger Bands to your advantage is to keep abreast of the necessary conditions and be prepared to make quick decisions. The good news about Bollinger Bands is that they help you grasp market momentum and, therefore, the propensity for reversal or the potential breakout point. If you trade fast (scalp), they are the right tools for you. If the bands are narrow, it means the market is in a quiet state; therefore, it is better to be careful and be on guard because such a condition always precedes a breakout. When the bands on the charts expand, it is a sign that the volatility in the market is increasing, and there are chances for a quick move. One of the trading strategies that a trader can use in scalping is to trade the rebound from the outer bands. For instance, in a ranging market, a price that touches the upper band or goes through it can usually be expected to retrace back to the middle band, which is a moving average with a period of 20. Such a strategy as this works the best when the market is controlled in the certain way during the less active hours or when it is moving sideways. However, in a strong trend, the price can still remain outside the band for some time, therefore, one may not promise to sell anytime a touch occurs. Here is where the confirmation issue comes into view. You need to see a candlestick pattern or divergence or the momentum shift before entering the market. You can even take advantage of Bollinger Band squeezes when you squeeze the bands, the bands get tighter and tighter; that is, the price congestion increases. What such a confinement suggests is that a breakout is imminent. So here, you can employ stop and limit orders above and below the band to capture the move as it starts happening. Bollinger band trading is a short-term trade that requires accuracy, speed, and saturation, yet if used with strict risk control and confirmation, it will also turn into a powerful visual reference searching tool that suits all the situations at one go.
