A Nice Bollinger Band Trade

Since I'm in the midst of a short EUR/USD trade triggered by the upper Bollinger Band, I thought I'd post a snapshot to illustrate the strategy behind this trade. Here's the daily EUR/USD chart from my Metatrader platform. As you can see, a couple days ago, on Sunday, August 6, the price left the upper Bollinger and traded entirely within the band. This pattern, which is very similar to the Doji Star candlestick formation, suggested an imminent reversal downwards. Sure enough, on Monday (below the yellow arrow), the EUR/USD dropped over 60 pips.

Today the downtrend seems to be continuing, after some extreme volatility prompted by the Federal Reserve's rate announcement - that's the huge upward spike you see that nearly hit 1.2900 today. Having weathered that short-lived storm, my trade's showing a profit of 67 pips, plus a few additional pips in interest. Yet another reason Bollinger Bands are one of my favorite chart indicators

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Candlestick Chart Tutorial