Bollinger band might the only indicator which is often considered as the prime trading tool by many traders. Since the upper and lower bands act as dynamic support and resistance level, the traders get the unique opportunity to place some good trades. With the concept of trend trading strategy and using the upper and lower band, it’s possible to create a well-organized trading strategy. The use of the Bollinger band indicator is not only limited to the trend trading technique. It can also be used to scalp the major levels with a high level of accuracy. Regardless of your trading system, the naïve traders often commit a deadly mistake while using this indicator. Let’s discuss the most common mistakes associated with the Bollinger band trading strategy.
Using in the lower time frame
No indicators can generate quality signals in the lower time frame. Though we can debate on this topic for years this is the only effective way to ensure quality execution of the trades. Feel free to use any indicators in the lower period and try to make a profit. Chances are high you will not be able to find any good trades. Switching back to the higher time frame can dramatically increase your profit factors. For instance, if you use the dynamic levels of Bollinger band in the daily time frame, you are using the key trading zone. So, placing the trades at those level ensure quality executions. So, start relying on the daily time frame to improve your profit factors.
Ignoring the trend
The Bollinger band users often think the market is in ranging movement. For a certain moment the market might in ranging movement but most of the time it’s trending. If you notice the price chart, you will see the Bollinger band is either going up going down? It’s more like the ascending and descending channel. So, learn about the trend trading strategy using the Forex practice account. Learn to draw a valid trend line as it will tell you a lot about the market trend. Let’s say, the AUDUSD pair is in an uptrend. So instead of trading the upper band, you need to look for buying opportunity in the lower band. With the technique, you can easily avoid placing trades against the major trend. Try to develop this skill as it greatly improves your trading skills.
Leverage of the trading account
Those who rely on the Bollinger band trend strategy should never use a high leverage trading account. Leverage trading can cost you money and you might even blow the trading account. So, place your trade after learning more about the leverage. Leverage trading is one of the key reasons for seeing so many retail traders. But due to the high leverage trading account, the traders are failing to make a profit. So, is it better to use leverage or not? Frankly, leverage is better for the retail traders as it gives them a unique opportunity to make a profit. You are here to make some serious profit. So, if you start trading the market with 1:1 leverage you are not going to make a big profit. You will become the ultimate loser since you will not get a decent return from your investment. So, carefully use the leverage when you use the Bollinger band indicator.
Ignoring the news factors
At times, the Bollinger band starts to expand when the price reacts to the major news. As a currency trader, you must minimize the loss in each trade. Making consistent profit is more about dealing with the high impact news. Thinking to make a profit based on the Bollinger band and ignoring the news factors creates a massive contradiction. And with contradiction, you can’t expect to make some big profit. As a currency trader, you should always try to think about the safety of your investment. Though the Bollinger band trading strategy is extremely profitable still you should follow the conservative trading technique.