Bollinger bands and trending markets - how does the duo work?
Another tool that we can use to differentiate between trending and ranging market are Bollinger Bands. Remember those?

Why Bollinger Bands, you might ask. And I will explain everything.

You see, trending market is not exactly common or normal, for that matter. It is not the well-known, but for the most part (about 70-80 percent of the time) markets are ranging.

So. One might say that a trending market is a deviation. And what is the best trading tool to measure deviations? That’s right! Bollinger Bonds! I knew you would get it right!
Here is how it works.

You take two bands with deviations of 1 and 2 and you place them onto a graph. That is going to help you see the different price zones: the buy zone, the sell zone, and the no-man’s land-zone.
The sell zone is the area between two bottom bands of the standard deviation 1 and 2.

The buy zone is the area between the two top bands of the standard deviation 1 and 2.

No-man’s-land is the zone where the price doesn’t really have a definite direction.

And in the situation like this the trends can be seen:

In the sell zone the market downtrends.

In the buy zone the market uptrends.

And that is it – easy as cake.

We thank babypips for the imagery for this article.