How to trade the market with the Bollinger band indicator

Indicators are very popular among all the retail traders. In fact, many of the novice traders are messing up their trading chart by loading tons of indicators. They simply develop their trading system based on different kinds of indicators readings and make things very complex. But if you look at the professional Aussie traders then you will be surprised to see that most of them are using only one or two indicators in their trading chart. There are mainly two types of indicators

  • Leading indicators
  • Lagging indicators

Leading indicators are those indicators which give trading signals very early. On the contrary, the lagging indicators give much-delayed trading signals. So if you want to trade the market-based on indicators reading then you will never make any real progress. However, if you consider them as your helping tools then you will see a dramatic change in your trading career. Today we will give you clear instructions to trade the market using Bollinger band indicator. With this simple indicator, you can literally trade the market for consistent profit.

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Bollinger band indicator

The Bollinger band indicator is developed based on the principle of moving average. The upper band acts as the dynamic resistance level and the expert executes their orders at that level. On the contrary, the lower band acts as the dynamic support level of the market where the professional traders look for a potential buying opportunity.

Before you start trading the market by using the Bollinger band indicator you need to understand that this system works best when used in the higher time frame. And most importantly you must trade the market in favor of the trend. For instance, if the EURUSD pair exhibit long bearish momentum in the daily trend then you should always look for selling opportunity while using this indicator.

Price action signal

Some experience professional in the options trading industry often uses price action confirmation signal to trade the Bollinger band support and resistance level. The market often exhibits false spike at the dynamic band of this indicator so you need to filter it out to improve your winning edge. Though you can use the oscillator to find the overbought and oversold condition of the currency pair but still it’s thousand times better to use the price action confirmation signal. You can easily set tight stop loss by using the candlestick pattern formation and set your take profit level to dynamic support or resistance level of the market.

Some novice traders often use this indicator on the lower time frame thus lose a huge amount of money. But if you want to become master this trading system then you always have to trade it in the higher time frame. However, this system can also be used on the lower time frame and in that case you need to be very cautious about the false spike. If there is any high impact news release then never trade by using this system. Most of the time the major breakout of the dynamic support and resistance level occurs during high volatile market condition.

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Saving your investment

As long as you follow proper money management you will be making a huge amount of money by trading the live asset. Some traders often consider strict trading discipline and money management as the Holy Grail of this market. But this doesn’t mean that you will never have losing trades if you blindly follow this two rules. Losing nothing but a part of your trading business. It’s your duty to ensure that your winners are at least two times big than your losers. To survive in this industry you need to trade the market with high-risk reward ratio. You might excellent trading signal with 1:1 risk reward ratio but still you should never execute that trade. Last but not the least never trade the market based on your emotions.

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