Bollinger Band (BB) is an indicator found by John Bollinger. This indicator measures the market volatility in comparison with the relative price in certain analytical time period. Basically, it reflects the market condition whether it is quiet or noisy, and gives signal to PAMM trader to determine a suitable strategy based on the current condition. Bollinger Band is formed by 3 lines (upper, middle, and lower band) which create a boundary belt to price changes.
In trading forex, Bollinger Band indicator is used as an early indicator and based on the fact that price is usually moves between the upper and the lower bands. But, actually this price tends to go back to the middle band. That’s why BB indicator also acts as the dynamic support and resistance. It is widely known that price will range inside the belt, but it’s also possible to find it ranges outside the belt. The determination of time period also impacts this movement. The small the time period, the wider the belt.
Since Bollinger Band is not an action indicator, it’s better for PAMM traders to use it in combination with other indicators before deciding to sell or buy in order to make a maximum profit. BB indicator will be great when combined with the volume indicator because it has a correlation with market condition. The characteristic of Bollinger Band indicator is the wide variable that is formed by the price volatility. In a high volatility, wide band will give place to the price and vice versa, the band will crossover and create a boundary to the price in a condition of a low volatility.
Here are some entry points a PAMM trader could do by using Bollinger Band indicator:
1. Entry point in a Buy Bottom Sell Top Strategy
In this strategy, a PAMM trader can open sell or open buy in the top of the trend where price tends to reverse.
2. Entry point in a Breakout Strategy
Breakout is the condition where the bands go wider then followed by an increasing number of volume that caused by the breaking of a certain boundary which is the support or resistance. When graphic breaks the support or resistance, that is the entry point.
3. Entry point in a Correction Strategy
After a long trend or a strong movement happens, PAMM traders can take this strategy. The entry point is when graphic goes closer or touch the middle band after a long trend or a strong movement happens which is followed by the market saturation.
That is how Bollinger Band works as technical indicator in the PAMM trading.
Happy Trading in PAMM inevstments system !
Don’t forget to read this important article for PAMM trader
1. How to become a PAMM Trader
2. Understanding your Forex Trader Level as PAMM Trader