Bollinger Bands indicator is one of the most used indicators that every trader should know. In this tutorial, I explained how to use them while trading.

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Welcome to the Trading Journal. In this video, I will show you how to use one of the most-used indicators, which is called the Bollinger bands indicator. First, I will explain it, and then, I will show you some strategies you can try with Bollinger bands. Also, I will show you the biggest mistake people often make, while trading with Bollinger bands. Please don’t forget to subscribe for more trading and investing videos.
Bollinger bands are created by the trader/investor John Bollinger in the 1980s, and since that day, they are one of the most-used indicators.
Now let’s take a quick look at the Bollinger bands. Bollinger bands have 3 components. The first one is the red line in the middle, and it is the 20-period simple moving average, from our previous videos, you may remember that the slope of the moving average shows us the trend's direction. You can find the video about the moving averages below in the description box.
So, it is the first feature of the Bollinger bands. Thanks to the moving average between them, they indicate the trend. But 20-period simple moving average by itself is not enough to understand the trend. You should watch the video I told you about, in order to understand how to use moving averages to identify the trend.
And 2 other components are the lower and the upper band. They are simply 2 standard deviations away from the moving average. You might wonder, what do standard deviations have anything to do with it. But, they are really important because they indicate volatility. They indicate that if the market is overstretched or not.
Before diving into the other parts, I want to show you how you can find the Bollinger bands in your charting software. Here I am looking at 15 minutes euro to dollar chart on tradingview.com. It is a nice free website with all of the features you need to trade. To add Bollinger bands, you have to click here on the top menu. It says “indicators and strategies” and in the opening window, we will search for the Bollinger bands. You can add them to your favorites since we will use them quite often. So we click on the Bollinger bands. And now, we have them on the screen. If you want to change, how they look or their settings, you can click the setting icon here. These are the default setting of the Bollinger bands indicator. You can change the standard deviation if you want. If you increase it, to 3 for example, you will see that more of the bars will be inside the bands. But I use it with default settings, which are 20-period moving average and 2 for standard deviation.
On average %95 of the bars are inside the range, they are inside the bands. So 19 out of 20 bars are inside the Bollinger bands. Let’s think that for a second. Since nearly all of the bars are inside the bands, and since the Bollinger bands are used by many traders, the bands can act as support or resistance.
It is the second use of the Bollinger bands. Since many traders look at this indicator, these 2 bands can act as a psychological barrier. And we call these kinds of barriers as support and resistance.
If the price is outside of the bands, it means that the price is not at the standard level, so it is either overbought or oversold. You can see here, the price reaches the upper band, it means that it is overbought and it can bounce from that point. I know what some of you guys think. You think that, if you go long at oversold levels and sell at overbought levels, you will make a profit. But trust me, if you follow that strategy, you will lose money. Because you should never trade Bollinger bands alone by themselves. Instead, you should combine them with candlestick patterns and other indicators.
It is the most common mistake new traders make while trading with Bollinger bands. They buy anytime when the price touches the lower band and they sell anytime when the price touches the upper band. This strategy might work when the price is moving inside a range but if you follow this strategy, you are most likely to lose money in the long-run.