Technical indicators are mathematical tools that analyze one of the five following figures: open price, high, low, closing price and volume. As a result of the calculation, technical indicators are plotted graphically as chart patterns.

Bollinger Bands

Bollinger Bands is a technical indicator developed by John Bollinger, which is used to measure a market’s volatility and identify “overbought” or “oversold” conditions.

Bollinger Bands are typically plotted as three lines: An upper band, a middle line, a lower band.

The middle line of the indicator is a simple moving average (SMA).

Most charting programs default to a 20-period, which is fine for most traders, but traders can experiment with different moving average lengths after they get a little experience applying Bollinger Bands.

The upper and lower bands, by default, represent two standard deviations above and below the middle line (moving average).

The Screener results for BBands displays the following:

A BBands’s case study

We examine what happens to the major FX instruments after 8-days since prices hit or closed below the lower band (BBands: 23, 2).

According to the following table, we see that the majority of the instruments experienced a bullish movement, after 8-days since prices hit or closed below the lower band (BBands: 23, 2).

By picking up USDJPY, we see that the study contains 1961 bars. Since 2015.01.15, a more than 1% gain within a week has occured 103 times. According to the statistics, we see that the last case resulted in a positive 1.69% change. Further, by looking at the mean % change and median % change, we see that both were bearish (0.39% and 0.29% respectively).

By clicking on the USDJPY symbol, we can get the graph with the study’s results as below (only available in MT5).