The indicator called the Bollinger Bands, or the B-Bands in short, measures volatility of the asset in relation to the moving average. It is constructed of three lines. The middle one is a simple moving average with period 20, two others lie on both sides of the average. The further they are from one another, the higher the volatility.
The purpose of this tutorial is to show you first, how to configure the B-Bands and second, how to use it in trading at Olymp Trade.
Overview of the Bollinger Bands indicator
Take a look at the picture below. There are three lines of the indicator. The SMA20 is in the middle, and two bands are located on its sides. The B-Bands gives you the information about the volatility of the market and thus, may be utilised to find the most promising entry points.
These three lines represent:
- The lower band is the value of the SMA20 minus twice the 20-day standard price deviation.
- The middle one is a simple moving average over 20 days.
- The upper band is the value of the SMA20 plus twice the 20-day standard price deviation.
Configuring the Bollinger Bands indicator on the Olymp Trade platform
You have to be logged in to your Olymp Trade account. Choose the asset and the chart type. Then, hit the indicators feature button and press “Bollinger Bands” on the available indicators list.
The default settings are period 20 and deviation 2. You can change it by clicking a pen icon. Additionally, you can adjust the colour and the thickness of the lines.
How to trade with the Bollinger Bands indicator at Olymp Trade
Trading with the B-Bands is quite simple. But be aware that it works best on short-lasting trades. Now, take a look at the above chart.
The circled points where the price hits the lower band of the Bollinger Bands indicator, are signals to open long positions. The moments where the candles reach the upper band of the indicator, are good to enter short trades.
There is no better way to learn to trade with the B-Bands, and well, with any other indicator as well, like practice. Olymp Trade offers you a perfect place where you can train your skills without the risk of losing real money. It is called the Olymp Trade demo account. Open one if you haven’t yet and practise until you are confident enough to move onto the real account. Tell us how you find the Bollinger Bands indicator.
All the best!
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