Bollinger Bands Forex Trading Strategy
The Bollinger Bands forex trading strategy is designed to help spot volatility spikes in the market and properly gauge them in a manner that allows it determine when a trend is bullish or bearish.
The strategy adopts two technical studies i.e. the buzzer (20) custom indicator and the Bollinger Bands.
MetaTrader4 Indicators: Bollinger Bands.ex4 (default setting), buzzer.ex4 (20) (default setting)
Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day
Recommended Trading Sessions: Any
Currency Pairs: USD/CHF, EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, NZD/USD, EUR/CHF, EUR/JPY, GBP/JPY
Buy Trade Example
Long Entry Rules
Enter a buy position if the following conditions or rules hold true:
- If the Bollinger Bands shows sessions in the market when it squeezes, then it is an indication of an impending breakout. The more time passes while price is held within the narrow bands range, the more forceful and far-reaching breakout is anticipated.
If we further experience a widening of the bands with price trading along the outer upper Bollinger bands, price is said to be bullish i.e. a long entry.
- Upon confirming “rule 1,” if the line of the buzzer (20) custom indicator turns lime, it is a signal to go long.
Stop Loss for Buy Entry: Place stop loss below the lower Bollinger band.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit on position if the following chart or indicator pattern pops up:
- If price closes below the middle Bollinger Bands, it is a trigger to exit or take profit accordingly.
- If the line of the buzzer (20) turns red, it is an exit or take profit trigger.
Sell Entry Rules
Enter a sell in the market if the following holds true:
- Watch for sessions of Bollinger Bands squeeze and once that is confirmed, wait for price to trade along the outer lower Bollinger Bands for price to be bearish.
- If the buzzer (20) indicator line turns red, it is a signal that price is heading lower i.e. a sell alert.
Stop Loss for Sell Entry: Place stop loss above the upper Bollinger band.
Exit Strategy/Take Profit for Sell Entry:
Exit or take profit when in short positon(s) if the following indicator/chart pattern:
- If price closes above the middle Bollinger Band, it is right to exit or tale profit accordingly.
- If the line of buzzer (20) turns lime, it is a trigger to exit or take profit.
About The Trading Indicators
The Bollinger was created by John Bollinger, as a tool to gauge volatility in the market, along with other vital information like sessions of market consolidation, direction of trend, possible tops and bottoms along with price targets.
The Bollinger Bands are actually plotted two standard deviations away from a simple moving average.
The Buzzer custom indicator is also built based on tweaked moving averages, but offers a color changing scheme as a means of defining buy (lime color) and sell (red color) in the market.