BBands Forex Day Trading Scalping Strategy

The BBands forex trading strategy is equipped to aid the day trader scalp the market as back-to-back.

The entry rules and conditions are simple and accurate for adoption by beginners and advanced traders alike.

The strategy combines the MA BBands and Relative Strength Index MT4 indicators in dishing out signals.

Chart Setup

MetaTrader 4 Indicators: MA_BBands.ex4 (default setting), Relative Strength Index.ex4 (14)

Preferred Time Frame(s): 1-Minute, 5-Minutes

Recommended Trading Sessions: Any

Currency Pairs: Majors, currency cross pairs

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Buy Trade Example (Click the image for full size)

bbands-forex-trading-strategy

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy if the following chart or indicator pattern are in display:

  1. If the MA_BBands custom indicator forms a blue upward pointing arrow that is aligned below price bar, along with price breaking out from a possible squeeze in the bands of the MA_BBands indicator. Fig. 1.0 shows price breaking out from the lower outer band of the MA_BBands indicator.
  2. If the line of the RSI(14) breaks above the 50.00 mark, it denotes bullish sentiment in the market, thereby signaling a buy.

Stop Loss for Buy Entry: Place stop loss ~ 10 – 15 pips below entry price.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position based on the following rules or conditions:

  1. If a red downward pointing arrow of the MA_BBands custom indicator forms above price bar or the indicator bands squeezes, while price tests the upper outer band of the indicator, an exit or take profit is most suitable (refer to Fig. 1.0).
  2. If the line of the RSI (14) breaks below the 50.00 mark, it is a signal that price is about to break lower and would be appropriate if open position(s) are exited.

Sell Entry Rules

Enter a sell in the market if the following conditions are true:

  1. If the MA_BBands custom indicator forms a red downward pointing arrow placed above price bars, following a contraction or squeeze of its band, it is a signal that price is being pressured lower. Usually price is seen to bounce off the outer upper band of the MA_BBands custom indicator, a move that gives more weight to the downward trend.
  2. If the line of the RSI (14) breaks below the 50.00 level, it is indicative of a sell.

Stop Loss for Sell Entry: Place stop loss ~ 10 – 15 pips above entry price.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit on open position(s) if the following holds true:

  1. If price tests the lower outer band of the MA_BBands custom indicator, it is a trigger to exit or take profit on position(s).
  2. The RSI (14) line breaks above the 50.00 level, it is a call to exit or take profit on position(s).

bbands-forex-trading-system

Fig. 1.1

Free Download

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About The Trading Indicators

The BBands.ex4 custom indicator is a mix between an MA channels and Bollinger Bands. It is essentially a signal indicator that deploys the mechanism of the moving averages.

The Relative Strength Index attempt to define oversold and overbought regions in the market. Designed by J. Welles Wilder Jr., the indicator is a momentum oscillator that matches downward and upward movements in closing price.

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