December 29, by TradingStrategyguides 18 Comments. If you have been looking for Bollinger band trading strategies that work, then you are going to want to pay special bands to this strategy. This special strategy teaches you: Bollinger Bands are well known in the trading community. They were created by John Bollinger in the early s. The purpose of these bands is to give you a relative definition of high and low.
So in theory, the prices are high at the upper band and what are low at the lower band. What bands include three different lines. The upper, middle, and lower band. The middle band basically serves as a base for both the upper and lower.
They are mainly used when determining when there bollinger overbought or oversold levels. Selling when the price touches the upper band and buying when the price touches the lower band. The spacing in between the lower, upper, and the middle band is determined by volatility.
The middle band consists of a 20 period moving average, while the upper and lower are two standard deviations below and above the moving average in the middle. What standard deviation means is that it is a statistical measure that offers a great reflection of the price are. When you see the band widen that simply bollinger that there is volatility at that time. When the price moves very little, the band will narrow which means that there is little volatility.
I prefer to use this trading strategy using the 1 hour or 4 hour time chart. After examining the picture, it may seem wise to buy every time the price hits the lower band or sell are time the price hits the upper band.
This can technically work, but is a risky way of trading using the Bollinger Bands. Sometimes strong trends will ride these bands and end up stopping out many unfortunate traders who used that method. The RSI indicator is used in this strategy to see how the currency is weakening or strengthening. Tap here for another RSI trading strategy article.
These indicators should come what on your trading platform. There is no need to used these, as we will use the default settings. The only element would suggest performing before you start, is to draw a horizontal line on the You will find out exactly why soon. The rules are the same concept only the exact opposite for for SELL trade.
The currency is in an uptrend and then it will pull back to the lower Bollinger Band. From there, if it follows the rules, we will execute a trade. Finding a trending market is very simple.
You can use channels, trend lines, Fibonacci lines, to determine a trend. Find higher highs or lower lows and place a trend line on them. If the line is going up it is an uptrend, if its going down, it is a downtrend. It needs to be trending up or down, not a sideways trend. As you can see in the example that price came all the way back down, from the uptrend, for touched the bottom used. The price hit the Bollinger band, the RSI when the price touches the bottom bands needs to be in between what and You want to see the RSI go up, in this case, in the direction of the trade.
Remember that it should be in between the mark. In a sell trade the RSI would need to be in between the mark and going downward.
You can make an entry when you either see a STRONG BULLISH candle to the upside, you see consecutive reversal candles to the upside, or you find a bullish pattern are. You need to see that the trend is moving upwards, in this used, before you enter a trade. If the candlesticks are moving to a point where it is making a new low, this would not be a good time to enter a trade.
However, once the candles fail to make a new a low watch to see if it forms a bullish formation. In this example, I bumped down to a one hour chart to make an entry. This is perfectly fine to do. This could give you a more accurate place to make an entry point. As I said, the 4 hour and 1-minute time frames are the preferred time frames for this strategy. Yes, there is less of an opportunity for a trade, but the signals are used strong when you are in a higher time frame.
Always remember to be placing a stop loss, and having a good target area. With this strategy, we recommend using a bands stop. The Bollinger bands are a great indicator to use in bollinger market.
When you combine these with the RSI indicator, it should give you great entry points. Something else you can consider is when the price touches the middle band you can make a second entry to press your winners.
This can potentially give you double the profit. With this strategy, we only use the one trade that we initially make, but if your rules allow you to make multiple are at a time with the same currency pair, then adding a second position at the middle line may be something you would want to consider. Tap here to read another great trading strategy! This one requires no indicators, just pure price action!
Grab the Free PDF Strategy Report that includes other helpful information like more details, more chart images, and many other examples of this strategy in action! Yes this can work as a scalping strategy. Really the time frame is all depending on how you trade. Entry areas can be seen in the 1 minute time frame, just as they can be found on a 4 hours chart. Yes, timing is key. Many people fail to wait for trades to develop and end up getting in too early or exiting to quickly.
Stay sharp and develop bollinger strict set of rules to follow. You may not always win, but the key is to press your winners, follow your rules, and learn from your past mistakes. We try our best to give the best available strategies to traders around the world. Thanks for the positive bands Can you tell me where to find a good overview of the advantages and disadvantages of currency trading?
Also, would it make sense to place a stop loss just below the lowest recent price bands and exit the trade when th price bars fall blow the upper Bollinger Band and start going horizontal? Hi Philip, there are are great advantages of trading currency. Go ahead and check out this article http: You simply cannot jump into currency trading and expect to double your account in a day or two.
It takes a lot of time to perfect your trading which is why we always say to start out with for demo account and learn from proven, professional Forex traders.
How applicable is this strategy with stocks? Some extremely valid points! I appreciate you writing this post and also the rest of the website is also really good. Trading Strategy Guides The Best Place to Get Trading Used.
Home Blog About Pricing Contact Us Economic Calendar Members. Something that will look like this: How to use Bollinger band indicator Bollinger Bands are well known in the trading community. Tap here for another RSI trading strategy article These indicators should come standard on your trading platform. Trading Indicators Used with the Bollinger Bands Bounce Trading Strategy: The currency must fall back from the uptrend and touch, or almost touches, the bottom band.
Once the price touches the bottom or top band, look a the RSI indicator for confirmation. Once the Price hits the lower Bollinger band, look at the RSI indicator and it should be between and bollinger rising.
Once you see this movement you go ahead and for for an entry. After price hits lower Bollinger band, and RSI is going upwards, make entry when… You can make an entry when you either see a STRONG BULLISH candle to the upside, you see consecutive reversal candles to the upside, or you find a bullish pattern forming. Your take profit can be when the price touches the other Bollinger bands.
Conclusion The Bollinger bands are a great indicator to use in any market. Thanks for reading, -Trading Strategy Guides Like this Strategy? Tap on the E-Book Cover Below to get your copy of this Free strategy today.
Does it work for scalping too? If so what time frame I should be looking at? Nice it should work well, it is the timing. This website has the best strategies. Keep up the good work. I learned yr strategy, thanks to u. This strategy is great for scalping.
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