Breakouts Trading with Moving Averages & Bollinger Bands Strategy

Do you want to know more about Moving Averages and Bollinger Bands? With our ultimate moving average and bollinger bands strategy you will learn what moving averages and bolliger bands are, how to trade with them and much more.

Moving Average and Bollinger Bands Strategy Explained

In this video, I’m looking at breakouts using moving averages and Bollinger Bands. In the first chart, I have a 200 day exponential moving average placed upon the GBP/NZD daily chart. You can see clearly that we broke through the 200 day exponential moving average to the downside in December 2015. Recently, we have seen the pair test the bottom of the 200 day exponential moving average and fall. So in this example, you can see where we had an actual break out to the downside as we jumped on the other side of the exponential moving average. It was offering support previously, and then we broke through it. Later, you can see where we did not manage to break out and above the exponential moving average, and that shows that the negativity is still very much a part of this market.

In the AUD/JPY one-hour chart, you can see that I have the Bollinger Bands printed on the chart. Notice that the spread of the indicator was very tight, and then we shot straight through the roof and above the overbought indicator. While this typically means that you are looking to sell, when the Bollinger bands are very tight it means that volatility has all but died. Sooner or later inertia will kick in and we have to move in one direction or the other. So having said that, once we broke out to the upside it shows that the buyers are starting to take control. Later on, we ended up falling back to and eventually through the mean (middle line) of the Bollinger Bands, and it means that the explosive move to the upside was indeed over.

While these are 2 totally different techniques, they both are used quite extensively by the trading community. Because of this, you should be aware of these potential tools that are available to you.