Hello dear traders! Today I will present to you another simplest trading method used in the Forex market, only one Bollinger bands indicator is involved in it, it is only necessary to build trend lines as an additional analysis tool, one might say that this is the main condition of the system.
As we know, the price is about 95% of the time within the boundaries of the Bollinger Bands, and so, their borders will serve to determine the price extremes at which we will build a trend line, in the future, it will serve as good support and resistance, and in combination with the Bollinger Bands will give good signals to enter the market.
So let’s start in order.
The “Trendline + Bollinger bands” trading method is applied to any currency pair, any time frame, but do not forget, the higher the timeframe, the more reliable the signal.
Installing the indicator on the chart Bollinger bands with standard settings (period 20, deviation 2, apply to “Close”).
The principle of the trading method
Look for extremes on the chart that touch or go beyond the upper or lower Bollinger Bands and connect them with a line. That is, to build a trend line, we need at least two highs, or two lows.
On the extreme points on the chart, points 1 and 2 built trend lines, later they served as excellent support and resistance at point 3:
When the price touches the lower Bollinger band at the level of the trend line, the system gives a good signal to buy, and when it touches the upper line, to sell.
Another example, at the minimums 1 and 2, which go beyond the boundaries of the lower Bollinger line, a trend line was built, it serves as support, after a while its breakdown followed, now the trend line acts as a resistance, which was confirmed at point 3:
The next example: in the first case, the trend line was built at the highs 1 and 2, then the price breaks it, draws Pin bar and rolls back, through a maximum of 2 and a new maximum (the tail of the Pin bar), we also draw a trend line (dashed); subsequently, it is clearly taken into account by the price (the price goes beyond the upper Bollinger line, touches the resistance (trend line), rebounds and rolls back):
In the second case, the trend line also worked beautifully as a support.
Now for the stop and take. Take profit can be fixed both on the middle Bollinger line, and on the opposite (when buying on the upper, when selling on the lower Bollinger line), or at the nearest horizontal level. Stop-loss is set at the nearest local minimum for purchases and a maximum for sales.
In general, the system requires analysis, so to speak, a run through history, and based on it, you will determine the optimal level of stop loss and take profit.
The main advantage of the trading method is that it is extremely simple! That’s all for today. Good luck with the method! Until.
The effectiveness of the strategy depends on the broker, I recommend – Alpari, RoboForex
Best regards, Evgeny Bokhach
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