HOW TO USE BOLLINGER BANDS TO DETERMINE A STOP LOSS (1Hr +)
This is the 1Hr. chart for
GBPUSD
.
Let's say that, according to your trading strategy, you were supposed to enter long in the 1.29 area yesterday on the
GBPUSD
, but without a clear idea on where to place your Stop Loss.
In this case in fact, being a 31 year old low, as we all know, it is more than hard to predict where a bottom would be found, however, bollinger bands come in our help as they are meant to calculate the deviation from price, in situations of "normal" volatility (like this one).
You will have to switch the standard deviation, of course, to make it more prudent.
Statistically, a standard deviation of 3.7 - 4 will cover 75% of the cases, 5 will cover 85% of the case, and 6 will cover 95% of the cases. Bear in mind that High Volatility situations cannot be "standardized", therefore, in these contexts, BB won't work.
Works only taking into account 1hr charts or lower timeframes (4hr, Daily).
Used by institutional investors.
GBPUSD
. Let's say that, according to your trading strategy, you were supposed to enter long in the 1.29 area yesterday on the
GBPUSD
, but without a clear idea on where to place your Stop Loss. In this case in fact, being a 31 year old low, as we all know, it is more than hard to predict where a bottom would be found, however, bollinger bands come in our help as they are meant to calculate the deviation from price, in situations of "normal" volatility (like this one).
You will have to switch the standard deviation, of course, to make it more prudent.
Statistically, a standard deviation of 3.7 - 4 will cover 75% of the cases, 5 will cover 85% of the case, and 6 will cover 95% of the cases. Bear in mind that High Volatility situations cannot be "standardized", therefore, in these contexts, BB won't work.
Works only taking into account 1hr charts or lower timeframes (4hr, Daily).
Used by institutional investors.