If the average swing for a currency pair is 50 pips in a quiet market, but expands to 100 pips in a volatile market, a forex trader has to adjust their approach to account for the bigger swings. A 50 pip stop is different in a quiet market than it is in a volatile market. What makes Bollinger Bands different is that the distance between the bands is designed to widen when the forex market becomes volatile and tighten when the forex market is quiet. When using this tool to find a trade, the first step is to identify the direction of the trend on the daily forex chart. If the trend is up, we want to look for buys only and if the daily trend is down, we want to look for sell trades. If the market is in a downtrend, we should look to sell on a test of the upper Bollinger Band and if the market is in an uptrend, then we should look to buy on a test of the lower Bollinger Band. That entry price level will move further away from the forex market in volatile times, giving you a better entry that is adjusted to the current situation rather than past activity.

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