Bollinger Bands Indicator for MT4
The Bollinger Bands Indicator for Meta Trader 4 is a very popular indicator among traders and has gained popularity because of its stability and how it graduates the average of price movements over a period of time, analyses it and projects a direction for price based on its analysis of the immediate past price movements gathered. It can be very useful to any trader in many ways.
Benefits derived from using The Bollinger Bands Indicator for Meta Trader 4
Traders have come to use and rely on The Bollinger Bands Indicator for Meta Trader 4 as hundreds or even thousands of different trading strategies have been built around this indicator because of its unique price action forecasting qualities.
Firstly, The Bollinger Bands Indicator for Meta Trader 4 can forecast the direction of the price of a currency pair or trading asset at a glance. This means that any trader looking at the indicator can immediately get a feel as to what direction the price may likely go to within a short time period. This is very useful since in order to make any profits in the market, at the very rudimentary level, a trader needs to be able to have a feel or general sense to the direction of price and be able to then place trades in whatever direction he or she predicts that price may follow in the very near future. A key point worthy of note, however, is that if the trader wishes to get very accurate readings of price directions, the trader would have to use a higher timeframe chart.
This means that although The Bollinger Bands Indicator for Meta Trader 4 can predict the price of a currency pair or trading asset, the trader would probably need to use the indicator on the higher timeframe charts like the Daily time frame or the 4 Hours timeframe if the trader wants to get a clearer, more accurate prediction of the direction of price on that timeframe and lower time frames in general. As a general rule of thumb, The Bollinger Bands Indicator for Meta Trader 4 becomes more accurate in its predictive abilities as the timeframe of a currency pair or trading asset increases.
A lot of traders understand that identifying price ranges in a currency pair or trading asset is one of the major keys to unlocking very large trends but does not have a very solid idea as to how to either identify trends or participate in trading from such trends when they have been identified. The Bollinger Bands Indicator for Meta Trader 4 is very useful because trend identification is one of its major functions to the trader.
This means that the indicator can visually enable a trader looking at price action and the way the indicator reacts to price action, can then identify that price is caught within a range based on the shape and properties of the bands of the indicator at that particular time without even looking at price action. This makes sense since the indicator quickly compresses price action over a recent period and creates future predictions from it on the go.
During a range or 'ranging market', the price of a currency pair or trading asset will likely create a mixture of lows and highs that are not just almost equal but that are also not moving in any particular direction. During this period, the bands of the indicator that are usually on the top and bottom of price begin to compress towards the price. Depending on how long a ranging period lasts, the bands of the indicator can become so close that both of them are now touching price as it makes very tiny up and down moves within the range.
The trader can then map out the highest high within the range and the lowest low within the range. This will immediately enable the trader to identify if a price breakout occurs in any direction. The trader can then place a trade once price breaks out in any direction and place a protective stop on the other side of the price range so that price would have to get back within the range and hit the other end before it can stop the trade out of the trade.
Using The Bollinger Bands Indicator for Meta Trader 4, a trade can quite easily spot entries and exits into a trending market. This means that the indicator makes it very easy for traders to visually identify opportunities in the market to either enter a trade or to leave a trade profitably. With The Bollinger Bands Indicator for Meta Trader 4, there a more than a ton of different ways to trade profitably, both entering and exiting trades.
Some of the profitable ways to use the indicator to make profitable trades would either be to trade a compression breakout or a reversal in direction. A compression breakout consists of when a trader spots price compression with the indicator and then using horizontal lines to map the compression area. The trader would then buy or sell a breakout from this compression are and wait for the price to cross the middle line of the indicator in the opposite direction before the trader then leaves the trade. This way, the trader can always keep to the correct side of a trade and also exit a trade before a total reversal in the direction that might erode profits in a big way occurs.
Another way to use the indicator for entries into a trend would be to wait for a price reversal to occur. The trader's aim is not to get in on the actual reversal but to get in on the second wave of price after the first retracement in the price. This second price wave should be in the direction of the new reversal that just occurred. The trader would then wait for the price to cross the middle line of the bands in the direction of the reversal and take the trade, adjusting their stop-loss orders according to how the middle line moves in order to protect some profit.
Another method for entering an already trending market is for a trader to get in on the price bounce against the middle line in a trending market. This means that the trader first watches price to see what direction it's going. Next, the trader watches the two outer lines of the indicator to make sure they are giving in the same direction as price. Then the trader starts to wait for the price to reverse and touch the middle line against the direction of the outer bands. The trader can then take a trade in the direction of the outer bands once the price hits the middle line.