Bollinger Bands Histogram Forex Strategy

The general idea behind the Bollinger Bands Histogram Forex strategy is based on the theory of the upper and lower Bollinger bands representing overbought and oversold zones in that order.

The strategy provides accurate buy and sell alerts that are based on the zero level break of the Bollinger Band histogram and buy/sell trend of two other indicators.

The strategy keeps things simple and flexible and does a fantastic job of gauging imminent market trends.

Let’s get started with the chart setup…

Chart Setup

MetaTrader4 Indicators: bb-histogram-indicator.ex4 (Inputs Variable Modified; bollingerPeriod=39), kalman-filter-indicator.ex4 (Default Setting), jurik-moving-average.ex4 (Inputs Variable Modified; Len=28, Colors Width Modified; #0=2)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a bullish trade if the following indicator or chart pattern gets put on display:

  1. If the aqua dotted line and lime histograms of the bb-histogram-indicator stay above the 0.00 signal level as illustrated on Fig. 1.0, the overall market sentiment is said to be bullish i.e. a trigger to go long on the designated forex pair.
  2. If the red line of the jurik-moving-average Metatrader 4 indicator crosses the line of the kalman-filter-indicator in a bottom up fashion (see Fig. 1.0), price is said to be pressured higher, therefore a buy signal is apt.

Stop Loss for Buy Entry: Place stop loss below the most recent swing low.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit from all trades if the following rules or conditions takes precedence:

  1. If while a bullish trend is ongoing, the bb-histogram-indicator displays a magenta dot along with a corresponding lime histogram below the 0.00 signal level, it is a trigger to exit or take profit at once.
  2. If the red line of the jurik-moving-average indicator crosses the line of the kalman-filter-indicator in the course of a bullish trend, bulls are said to be taking a hit, therefore an exit or take profit is advised.

Sell Entry Rules

Go short if the following setups gets displayed rightly on the activity chart:

  1. If the magenta dotted line and lime histograms of the bb-histogram-indicator stay below the 0.00 signal level as exemplified on Fig. 1.1, the general market sentiment is believed to be bearish i.e. a trigger to go short on the selected fx pair.
  2. If the red line of the jurik-moving-average custom indicator crosses the line of the kalman-filter-indicator in a top downward manner (refer to Fig. 1.1), price is said to be driven lower, thus a sell alert is appropriate.

Stop Loss for Sell Entry: Place stop loss above the most recent swing high.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  1. If during a bearish trend, the bb-histogram-indicator displays an aqua dot along with a corresponding lime histogram above the 0.00 signal level, it is a signal to exit or take profit forthwith.
  2. If the red line of the jurik-moving-average indicator crosses the line of the kalman-filter-indicator during a bearish signal, bears power is said to be diminishing, therefore an exit or take profit is recommended.

Sell Trade Example

Fig. 1.1

Free Download

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About The Trading Indicators

The bb within the bb-histogram-indicator.ex4 stands for Bollinger bands and the indicator mimics the working of the Bollinger Bands.

The kalman-filter-indicator.ex4 is a Metatrader 4 forex indicator that is comprised of a fast adaptive line that allows traders to evaluate trends.

The jurik-moving-average.ex4 is made up of an enhanced timing and smoothness algorithm while tracking the chart’s rapid up/down action.

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