The bollinger bands forex
trading strategy with 20 period moving average is a very simple forex strategy
that works very well for all kind of forex traders.
Learn below how to setup and trade this strategy in under
10 minutes.
Let’s get started with the trade setup...
Trade Setup:
Timeframes: 5 min and above
Currency Pair: Any
Trading Indicator: Bollinger Band with settings set to 20
periods.
Here’s how to set up the settings in MT4
trading platform:
SOME THINGS YOU NEED TO KNOW ABOUT THE
BOLLINGER BAND INDICATOR
Before we get into the rules of the bollinger bands forex
trading strategy here are some things that you need to know:
1. if
price is moving below the 20 period (the middle line) then the market is in a
downtrend.
2. if
price is moving above the 20 period, then the market is in an uptrend.
3. price
has to come and touch the middle bollinger band
line (the 20 period) for any trade to be initiated.
4. the
upper bollinger band line or the lower bollinger band lines can be used for
take profit (as soon as price touches it, exit…this is one option for taking
profit on your trades)
THE TRADING RULES OF THE BOLLINGER BANDS
FOREX TRADING
STRATEGY WITH 20 PERIOD
Selling Rules:
Check if market is in a downtrend and then price rises up
to touch the middle bollinger band line.
When middle line is touched, place a sell stop pending
order about 3-5 pips under the low of the candlestick that touched it.
Or you can wait to see if a bearish reversal candlestick is
formed first before you place your sell stop pending order.
The sell stop pending order must be placed only after this
candlestick closes.
Place your stop loss anywhere from 5-10 pips (or more)
above the high of the candlestick.
When to take profit or exit a trade- a few
options you can use:
When
price goes back down and touches the lower bollinger band line (you exit your
sell (short) trade).
Or set your take profit level equal to the distance the
price traveled in pips during that upswing to touch the middle bollinger band
line (see the blue dotted line below in the chart).
So you use that difference in pip movement and calculate at
what price level below you need to place your take profit target.
Or you can also use the previous swing low (bottom) as your
take profit target level.
I hope this chart here makes things a little bit more
clearer for you:
Buying Rules:
The rules for buying are completely opposite to the selling
rules given above.
You just do the exact opposite:
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