There thousands of indicators which you can use to trade the market. But if you look at the experienced traders in Singapore, you will find one thing in common. All of them are trading the market with the most popular indicators and Bollinger band is one of them. You might be new to the trading industry but if you do in-depth research on this indicator, it won’t take much time to understand how this indicator works. Luckily you won’t have to do research since we will present all the valuable information you need to use this indicator.
So, what is a Bollinger band indicator?
The Bollinger band indicator is based on different types moving average. It allows the traders to find dynamic support and resistance level. The upper band act as resistance level whereas the lower band act as a support level. Smart traders use these bands to execute short and long orders. But does this mean you will always win trades by executing trades at the upper and lower bands? The simple answer is no. You have to use other essential factors to find the best trades in the market.
Learn multiple time frame analysis
The first thing that you need to learn is multiple time frame analysis. It allows traders to filter out the best possible trades at any market condition. Since you will be executing trades based on the indicators reading its imperative you look at the daily and weekly time frame. If the price of a certain asset hits the dynamic resistance level in the daily chart switch to the weekly chart. The price should definitely trade near the upper band in the weekly chart. If not, the trade setup is not valid. Many retail traders are trading CFDs with Saxo based on this simple principle.
Use the price action signal
One of the most effective ways to trade the Bollinger band indicators is to use the price action confirmation signal. Since the upper and lower bands act as dynamic support and resistance level, you need to look for potential price action confirmation signal. Some of you might think learning the details of price action trading strategy is time-consuming but in reality, it’s very simple. Just try to understand the key reasons behind the formation of each candlestick. Once you decipher the psychological factors, it won’t take much time to find quality trades.
Never risk more than 1%
We all know indicators are nothing but helping tools. Sadly the rookie traders in Singapore often think this is the ultimate Holy Grail in Forex market. It’s true, trading the Bollinger band using the price action confirmation signal is very easy to make money but still, you have to consider the losing trades. If you take a huge risk in any trade, the chances are very high you will blow up your trading account within a short period of time. Instead of risking 2-3% of your account balance, you should only risk 1% of your investment. This will help you to reduce the risk exposure.
Becoming a pro trader in the Forex market is a very challenging task. However, with strong determination, you can easily become successful in the trading career. Though we are discussing the indicators and other technical parameters, it’s still important to learn the fundamental factors. Make sure you are not executing any trades prior to the event of any high impact news since it will significantly increase your risk factors in trading. Trading the Forex market is all about managing your risk properly. When it comes to indicator based trading system, you must follow all the strict rules of investment business. Try to start trading with the demo account offered by Saxo so that you can easily understand how this market works. Develop your confidence level before you invest any real money.