In the last article I talked about Forex trading with the help of one particular indicator, focusing on the fact that professionals use several indicators to filter out false signals. For those who are just starting Forex trading, but just wants to use professional tools, a consolidated Bollinger Bands MACD was created.
Strategy of Bollinger Bands and MACD
Bollinger Bands MACD – is an indicator, which includes two popular technical analysis tool:
- channels (bands) of Bollinger is an indicator measuring the volatility of prices. Relates to oscillators, to determine whether price is high or low compared to the moving average for a certain period of time;
- MACD – trend indicator moving average convergence (divergence), to determine the potential strength of the price chart at the time of reversal, the probability of reversal of the potential direction of chart.
Download archive with template of strategy and indicators used
Strategy of Bollinger Bands and MACD based on the fact that the indicator at the same time includes a tool that determines the price behavior and showing how much MACD deviates from its normal value.
- Timeframe – 30 minutes;
- Currency pair – Euro/US dollar;
- Trading platform – Metatrader 4.
Parameters of Bollinger Bands MACD indicator:
- FastLen = 12 (a period of fast moving average MACD);
- SlowLen = 26 (the period of slow moving average MACD);
- Lenght = 10 (setting of Bollinger Bands indicator);
- barsCount = 5000 (the number of bars on which to build the value of the indicator);
- StDv = 2,5 (the deviation of the Bollinger Bands from the middle of the channel).
The conditions for opening a buy transaction:
- important condition: the indicator has drawn a few red dots in a row under the red line;
- additional condition: in the first or second candle after the execution of the “main” terms above the red line indicator draws green dot;
- stop-loss – 10 points.
Open a long position on the next candle.
Partially (50%) exit the market when the profit is equal to 15 points. Move the stop loss to the breakeven level, set the floating trailing stop at 15 points. Closing 50% will get a fixed guaranteed profit, and trailing stop on the remaining 50% “squeeze” position, squeeze the maximum profit to the price reversal in automatic mode.
Deal for sale opens the same way. Wait, when the following conditions are met:
- the indicator has drawn a few green dots in a row above the blue line;
- on the next candle has a red dot below the blue line.
Open a position on the next candle.
The indicator works fine on this currency pair with a specified timeframe. Other currency pairs the strategy of Bollinger Bands and the MACD is also able to yield good results, but require individual selection of indicator parameters. Not advisable to trade if the Bollinger bands are too narrow relative to previous periods (as shown below).