Bollinger Bands Indicator Strategy

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Bollinger Bands Indicator Strategy

Fifty Sixth session of Forex Training

Welcome to Forex professional training in financial markets.

In this session we will study the Bollinger Bands Indicator Strategy.

Bollinger Bands

Bollinger Bands is a suitable strategy on a market that has a direction.

This tool uses Moving Average in which only the middle line, EMA50, is utilized.

Whenever trend is over the middle line and a significant candlestick forms, an important signal will be generated.

Some valid and strong candlesticks for a Sell order are: Dark Cloud, Engulfing and Shooting Star.

Some valid and strong candlesticks for a Buy order are: Piercing Line, Engulfing and Hammer.

Bollinger Bands Indicator Strategy - Exponential Moving Average 50 - Shooting Star Candlestick

Entry price can be determined based on a candlestick principals, thus, in a Sell order trader must place entry price lower than a Bearish candle, while in a Buy order it would be over a Bullish candle.

Bollinger Bands can be exploited on all symbols if they have an upward or a downward trend, especially on EURUSD, GBPUSD, Gold, Silver and Oil, however, the most appropriate symbols for this method are Oil and Gold.

Trader can use this strategy on all timeframes, but the best result would be on H1, H4, Daily and Weekly.

Buy order can be placed on an uptrend, when there is a decline to the middle line (EMA50) and a powerful Bullish candle forms on the EMA50.

If on a downward trend, a temporary ascent occurs towards EMA50, then a Sell order can be placed after a Bearish candlestick forms on EMA50.

Bollinger Bands Indicator Strategy - Engulfing and Hammer Candlestick Patterns

Some examples can be reviewed on MT4 charts.

On this uptrend, there are some points in which Bullish candles formed on EMA50, the middle line, after transient descents.

The first Buy signal was generated when a Hanging Man candle pattern has formed near EMA50. Then an upward movement.

Again another decline to EMA50 was finished after a Hammer pattern has formed.

This strategy could be used on multiple points of this trend. So an uptrend continued after a powerful candle patterns have formed.

Other examples on an uptrend, in which Buy orders were generated after Bullish candlestick patterns have formed on EMA50.

On a downtrend, there is an example that candle did not form under EMA50 so it was not a strong candlestick pattern to place a Sell order.

On the other point, a Tweezers pattern has formed so a trader could place a Sell.

Bollinger Bands Indicator Strategy - Bollinger Bands on MT4, EMA50, Pending, Buy and Sell Orders

Stop Loss price on this strategy should be placed 5-15 pips over a Bearish candle on Sell orders and below a Bullish candle on Buy orders.

Take Profit price can be determined by two methods:

  1. If Sell or Buy signals are generated, after calculating candle length in pips, known as X, then TP price is X pips over that candle in a Bullish order or below the given candle in a Bearish order.

If there is a pattern on that point, then TP price can be determined by that pattern such as Head and Shoulders, Double Top or Bottom.

That concludes this session, until next time and another session take care.

Linkages & Notices

Kindly visit 56th session: Introduction to Bollinger Bands Indicator Strategy on Financial Video Tutorial section to watch video format of Bollinger Bands Indicator Strategy.

You can find Introduction to Bollinger Bands Indicator Strategy video on PForex YouTube Channel.

PForex Educational materials in text and video formats are developed by PForex Department of Education to enhance and improve investors’ knowledge and trading skills. Due to high risks and volatile fluctuations in financial markets, traders and investors must develop their trading skills and knowledge. It is strongly recommended to apply Risk and Capital Management when trading in financial market

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