Kathy lien bollinger bands strategy

The Bollinger Bands Forex Strategy Guide

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It signals a reversal, which means it's time to close the short position. During the squeeze, one unusual phenomenon often happens that confuses most beginners. This is a false breakout that occurs in anticipation of the end of the squeeze. At this moment, the chart makes an intense but short-term movement. After that, it also reverses sharply and starts to move in the direction of the emerging trend. This phenomenon can also be used as a signal for the end of market consolidation.

Wait a bit until the movement develops so that there is no doubt that a new trend is forming. Experienced traders often derive additional profits from false breakouts. To do this, they open a position at the very beginning of the movement. After that, a trailing stop is set in such a way that it falls into the breakeven zone as soon as possible.

Further moving of the stop order in the direction of the candlestick formation will give profit when triggered. This strategy is suitable for trading on timeframes from M30 to H4. The essence of the trading system boils down to finding a price bounce, which is formed during the development of a trend. To do this, click on the "Indicators" button at the top of the chart. The Bollinger Bounce strategy involves trading on developing trends. The direction of price movement does not matter.

In an uptrend, we will look for the moment when the price rolls back down, touches or almost touches the lower band. In a downtrend, on the contrary, we need a moment when several candles go up and stop at the border of the upper band. Next comes the RSI. We will use it to understand how the instrument is strengthening or weakening in its value. In an upward trend and downward rollback, the signal is confirmed when the indicator line is within Ideally, it goes up. Accordingly, in a downtrend and an upward rollback, the RSI should be between 50 and 70 and going down.

If the main trend is upward, we enter the market at the close of the subsequent bullish white candlestick. If the trend is downward, enter after the close of the bearish bar. If the movement is too strong and you are afraid to miss a significant part of the movement, you can move to the next smaller timeframe and wait for the bar to close on it. Place stop loss a little behind the touch point of the Bollinger Band indicator. It is recommended to place take profit at the level of the opposite band.

In the place of the supposed bounce, one of the bars touches the lower band green oval area. In this area, the RSI moves in the direction of the trend and is located in the optimal range from 30 to 50 percent. Therefore, we can talk about a signal for the upcoming bounce.

Following the touch candle, a bullish bar is formed, signaling the start of a bounce. At its final point, open a long position at 1. Set the stop loss red line slightly behind. Take profit is placed at the level of the upper band blue line. The position closes by take profit blue line upon reaching the level of 1.

The profit from the trade was 1.

The Little Forex Guide that Can Lead You to The Big Profits

Many experts agree that strategies based on breakout signals are the most effective. The Bollinger Bands indicator is among the best indicators for tracking and predicting future impulses. This is noted by D. Rooney, technical analyst and trader with ten years of experience, winner of an award in writing trading systems.

One such trading system is the Bollinger Band breakout strategy. It is equally effective on both 5-minute and weekly timeframes. This strategy is the complete opposite of the Bollinger Bands bounce strategy. The founder of breakout trading is Bruce Babcock, the author of the intuitive trading theory. John Bollinger liked his approach to trading volatility breakouts and decided to adapt it to his indicator.

The key to success is the correct choice of timing to enter the market, namely, the moments of lowest volatility.

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To determine the narrowing, we will use the already familiar BandWidth indicator. If the BandWidth narrows, the trader should be prepared to see a breakout of one of the Bollinger Bands. We enter the market as soon as one of the candles closes above or below the line. The direction of the position coincides with the direction of the breakout.

This means, if the upper band is crossed, we open a long position, and if the lower one is crossed - a short position. Stop orders are placed just below the breakout candle. Then, at regular intervals, the stop loss is pulled up by the price movement distance. Such intervals will be different for each of the timeframes. In daily charts, the optimal nudge time would be the opening of trades at the beginning of the day.

You can also use the trailing stop, which changes the stop loss value at the close of each candle. Breakout Strategy is almost identical to Bollinger Squeeze. But there is also a significant difference. In this case, the stop loss is set in the breakeven zone during the growth process. We exit the market when the opposite band is touched: for the bullish movement - the lower band, and for the bearish - the upper band.

For the breakout strategy, I took the same chart that was used to demonstrate squeeze trading. The blue arrows indicate the narrowing area, the red one shows the candlestick crossing the lower level.

When it closes, we enter a short position. With the blue line, I marked the entry price of 1.

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And the red line is the initial stop loss. During the development of a bearish trend, we move the stop loss to the opening price in reality you need to move it a little lower to compensate for the spread. The new stop loss is marked with a red line. I also left the original one intact for clarity. It is now marked with a semi-transparent red line.

The position is closed when the candlestick touches the upper Bollinger band. This event is marked with a red cross in the chart. The closing price is marked with a green line and is 1. This trade should have brought us a profit of 1. The essence of this approach boils down to predicting the birth of trends using price strength analysis. The analyst considers the ability of the chart to approach the upper band during an upward movement and the lower one during a downward movement as a sign of strength. Additionally, the strength is confirmed by the MFI readings.

Select the "Indicators" folder.

The indicator window will appear. By clicking on the OK button, you will launch the indicator with default settings. Most of the settings are the same as well. The only difference is in the "Inputs" tab, where you can only change the period.

The tool itself is designed to measure the intensity with which funds are invested in a security or withdrawn from it.

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