Having evolved from the concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades. The default choice for the average is a simple moving average, bollinger bands trading strategy mt4 forex other types of averages can be employed as needed.
Usually the same period is used for both the middle band and the calculation of standard deviation. By definition, prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band.