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NZD/USD - Clean and Simple

Occasionally, after trawling through hundreds of charts, you find a trade that cleanly fits all of your trading plan’s rules. Those focussed on Bollinger Bands as a technical indicator may have that thrilling experience in NZD/USD.

The chart above shows the signs of a classic Bollinger Band mean reversion trade.

The pair traded out through the top Bollinger Band. Then it reverted back through the band. Volatility is NOT increasing, as evidenced by the fact the bands are not widening (bottom panel). Ding-a-ling. This is a sell signal at current levels, with a stop loss at say 0.7210, just above the top band. The target is the simple moving average (the mean, middle band), currently 0.7097.

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