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Bollinger Strategy – Making Deals

Tuesday, 26 December 2017 11:41
Bollinger Strategy – Making Deals

Bollinger Strategy is a trading system, which can be applied both in the Forex market and on the option transactions. The method is based on the Bollinger Bands indicator. When working with this strategy, the main goal is monitoring the quotation and reading the indicators’ signals. It is very simple to do, in comparison with most Forex systems.

Definition of Bollinger Bands and Its Application

Bollinger Bands is the most popular technical analysis tool. It is one of the standard applications of each trading platform. A robot is applied to identify the asset’s volatility during a trend, and for over 20 years it is considered efficient due to its simplicity of application.

On the chart the application forms three lines. The middle line is a moving average with a period of 20. Above and below, similar lines are formed with the shift to two standard deviations in each side. No matter how dynamic the price moves, it always remains between

Definition of Flat and Trend.  Trading on Impulse

The Bollinger Bands tool makes it clear, if the trend asset is quoted or shows small dynamic. That is, if the “bands” are shrinking, it means that the pair has a small dynamic. In this case, it is better to refrain from making deals. According to Bollinger Strategy, it is recommended waiting for a sharp impulse, after which quickly open a short-term order.

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It is one of the most efficient methods of Bollinger Strategy. Pulling this off is quite problematic since not every trader can predict the “shot” of the quotation. But if you succeed, it will be excellent. For better technical analysis use the M15 timeframe.

If the bands of the technical tool are separated too far, then there is a certain stable trend in the market. Below we will tell you about trading in a trend direction.

Trading from Border Lines by Bollinger Strategy

There are many methods, based on the Bollinger Bands indicator. Below you will find the information about one of the simplest one, which involves trading from the channel borders. At the same time, this strategy includes the elements of the Martingale system, and also, welcomes using fractals. The method can be used on any timeframes, starting from the M15.

The principal message of Bollinger Strategy is very simple. Follow the price movement in a range of the Bollinger Bands technical tool. Once the quotation goes beyond the lines, wait until the first candlestick closes out of range, and open an order.

  • Sell the asset if the price is fixed above the upper border of the channel;
  • If the bar closed below the upper border, buy.

In 5-6 candles, close the position. Usually, during this time the chart reaches the middle band.

If the transaction turns out to be unprofitable, you can use the Martingale system and enter the market again with a double rate. However, if the trend breaks through the Bollinger band and continues moving further, it is not recommended setting a position once again.

Additional Technical Tool in the Strategy

To minimize the risks from trading, use an additional trend tool of technical analysis – Fractals. Switch to the M30 timeframe here. Place the order of 5-6 bars.

  • Place a Sell order, as soon as the fractal has formed if the figure appeared above the upper Bollinger Bands line;
  • Set a Buy order when the situation is opposite.

If the signal is received, but two following candles touch the middle band, do not trade in this case. It is a very risky operation because the quotation can change at any moment.

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The rectangle highlights the points, which could yield good profit. Please note that the arrow should appear outside the corridor, and not only to break through the line of the bar’s shadow.

Bollinger Strategy makes no sense after the release of the important economic news. Do not open new deals for about an hour, since there may be a gap. 

Final Recommendations on Bollinger Strategy

The system based on Bollinger Bands is an effective way to earn money in conditions of the trend. A key trading robot is a technical tool, tested by time and millions of traders, and fractals just help to find the ideal moment for opening an order. Accurately following the rules of this strategy, even a novice trader will have a good profit.

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David Melton
David Melton

Financial expert. I work with investors and different companies. I write analytical reviews for newspapers and TV channels and I also manage researching projects

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