What’s up Traders, in this article, we’re going to be talking about Bollinger Bands Forex Trading Strategy (Forex Day Trading).
Hey guys in this article, I will show you a great training pattern, that will allow, you to profit from trading ranges by using, only one tool the Bollinger Bands.
Searching low volatility periods/Parallel Bollinger Bands
- Search for confluence areas for better entries
- High probability setup
- Confluence area
- Expanding BB (Bollinger Band): Increasing volatility
- Exit the Position if the Bands expand after you entered a Trade
- Tight stop losses outside losses BB (Bollinger Bands)
This trading pattern involves searching for periods of low volatility, with the Bollinger Bands parallel, one to each other the key of this pattern, is that we won’t use the standard settings of the Bollinger Bands, and we will use 50 period moving average.
And the standard deviation of three, because almost 99% of the price action is contained, within the standard deviation of three of the Bollinger Bands.
Now I don’t know about you, but I prefer to trade with the odds in my favor, so if a standard deviation of three will offer me around a 99% certainty, that the price won’t exit the Bollinger Bands then, I will be interested to trade, only with these settings the pattern is simple.
We will use the upper and the lower Bollinger Bands, as dynamic support and resistance levels, only when the Bollinger Bands are parallel one to each other.
Here is the pattern, you need to search for on your charts, you can see in this Bitcoin chart, that during sideways price action the Bollinger Bands serve, as a pretty accurate dynamic support and resistance indicator.
And the price barely exceeded the band’s the key of this pattern, is the parallel Bollinger Bands, we want to see the bands narrow and parallel.
Search for confluence areas for better entries
If this area coincides with a previous swing of support and resistance, that’s even better the pattern will be stronger in this example.
We have a perfect buy at a lower Bollinger Band an area also supported by the previous swing low, we also see a great short entry at the upper Bollinger Band, right at the previous swing higher.
Here is the same pattern on the EURO/JPY once, we see the Bollinger Bands parallel one to each.
Other we have our range, and we start looking for entries at a lower and the upper Bollinger Bands, as this pattern involves a lower volatility.
You just buy when the EURO/JPY tests the low end of its range, and you sell, when the currency pair tests the high of the range.
High probability setup
And the upper Bollinger Band this pattern, won’t allow you to catch big movements, but at least you will trade a high probability setup, when all the conditions are met the first target should be the middle.
Band and the next one will be the opposite end of the Bollinger Bands, depending, on the timeframe traded or the size of the training range.
You have room to catch some decent points, with diminished risk here’s the Dow Jones index, with the same pattern.
Here we have a perfect buy till our band, observe how the price stopped right at the previous support level which formed, an area of confluence with a lower Bollinger Band.
In this example, we have a static support and resistance and the dynamic one, a very powerful pattern very important.
Expanding BB (Bollinger Band): Increasing volatility
We need to always check the bands to see, if they are still parallel once, we see the indicator expanding, that’s a sign of increasing volatility.
Exit the Position if the Bands expand after you entered a Trade
And we should exit the trade, if we have a contrarian position opened in this example, we decided to short the market at the upper Bollinger Band and once, we saw the bands expanding, we close the position manually for a small loss.
Here’s another example on the dax index chart, here we have a great short entry at the upper Bollinger Band, followed by an excellent buy entry at a lower band area, which also included a support level from the previous price action.
Tight stop losses outside losses BB (Bollinger Bands)
This is one of my favorite Bollinger Bands patterns, as it allows me to enter the market during low volatility periods, at high probability areas and more importantly, with tight stop losses outside the Bands you could argue, that you don’t need the Bollinger Bands to execute this strategy.
But by having the Bands, you can validate that the market is in a flat or low volatility phase by reviewing, if the Bands are parallel one to each other.
Okay, so that’s it I’ve come to the end of this presentation, I hope you’ve enjoyed it and if you really do please write a comment and click the share buttons smash it right, and click to subscribe bell to Allow notifications be updated.
Whenever, I publish content like, this and finally any questions or feedback let me know below and I’ll do my best to help, so with this guide, I hope you got value out of this presentation, I wish you good luck and good trading and I’ll talk to you soon you.