Here’s – what I would think is – an instructive chart where everything does what it’s supposed to for once. Doesn’t matter what the pair is, or indeed what the x- and y-ranges are, except to say they’re standard enough.

We should all be reasonably familiar with the Bollinger Squeeze and Bounce – here’s the Bollinger Walk – (the Bollinger bands are 20-period 2 std deviation – ie. what your software will usually give you by default).

With a couple of excursions up towards the center line towards the end, the strong bearish breakout hugs on to the bottom Bollinger band, mostly closing outside.

Let’s consult the Bollinger rules:
“Price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.”

“Closes outside the Bollinger Bands can be continuation signals, not reversal signals.”

Here’s the continuation of the same chart…

Well, it works!! Again, the Bollinger bands have given the classic signal, with the price in bullish reversal marching back through the centerline and off towards the upper band. The only question was when to take profit? Some traders would have taken the fakeout, if that’s what it was, with a level of support appearing 1.6200 (yep, the pair was GBP/USD from last week… )

There’s a lot to be gained from careful study of Bollinger bands… like any indicator, they won’t always perform for you quite as cleanly as they have here.

One Response to “The Bollinger Walk”

1. ForexPerform » The Bollinger Squeeze says:

   February 13, 2009 at 10:52 am

   [...] more information about Bollinger bands, and if you ever feel like going through the theory attached, it’s all [...]

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