The indicator called the Bollinger Bands, or the B-Bands in short, measures volatility of the asset about 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.
Key Takeaways🔑
| →Bollinger Bands (B-Bands) is an indicator that provides information about market volatility. |
| →The indicator consists of three lines – SMA20 and two bands on its sides. |
| →Understanding B-Bands can help traders identify potential entry points on the Olymp Trade platform. |
Contents
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 information about the volatility of the market and thus, may be utilized 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 color and the thickness of the lines.
Pros and Cons of Using Bollinger Bands in Trading😃😞
Pros:
- Bollinger Bands provide an understanding of market volatility.
- The bands can help identify potential entry points for trades.
- B-Bands can be used to form trading strategies on the Olymp Trade platform.
Cons:
- May not always predict market movements accurately in highly volatile situations.
- B-Bands are primarily effective for short-term trades.
- It takes time and practice to effectively understand and use B-Bands.
Understanding Bollinger Bands versus Trading without Bollinger Bands
| Trading with Bollinger Bands | Trading without Bollinger Bands |
|---|---|
| Better understanding of market volatility. | May lack insight into market volatility. |
| Possible to identify potential trade entry points. | May miss potential entry points. |
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 practice until you are confident enough to move onto the real account. Tell us how you find the Bollinger Bands indicator.
All the best!
Common Questions about Using Bollinger Bands on Olymp Trade
- Q: How accurate are the B-Bands for predicting market volatility? A: While the B-Bands provide an insightful view of market volatility, they might not always predict market movements accurately, especially in highly volatile situations.
- Q: Can I use the B-Bands for long-term trades? A: The B-Bands are typically more effective for short-term trades. However, they can still offer insights into the market’s volatility for long-term trades.
- Q: How can I effectively use the B-Bands in my trading strategy? A: Practice is key. Olymp Trade’s demo account provides a risk-free environment to learn and practice using the B-Bands effectively.
- Q: Do I need any special tools to use the B-Bands? A: No, Olymp Trade’s platform already includes the B-Bands among its available indicators.
- Q: Can I trade without using the B-Bands? A: Yes, although the B-Bands offer a comprehensive view of market volatility, you can still trade without using them.