Intraday Trading Against The Trend

Intraday trading against trend is a contrarian strategy based on Bollinger Bands. The main feature of this strategy is the price corrections,

Setup strategy

Time frame 30 min, 60 min.

Currency pairs: EUR/USD, GBP/USD, USD/JPY, GBP/JPY, USD/CHF, EUR/GBP, EUR/AUD, AUD/USD, NZD/USD.

Indicators

Bollinger Bands 20 period with deviation 2.0.

Bollinger Bands 20 period with deviation 3.0.

RSI (Relative Strength Index) indicator, 14 period, close.

This contrarian strategy has low risk, but is not profitable with low reward in the trending market. This strategy in sideways market with volatility or when there is a medium-trend of the price is higher profitable with low risk.

Relative Strength Index indicator helps to find oversold and overbought levels where a trend turn is possible. When the RSI nears 30 level or goes below 30 level, the signal is that the currency pair is oversold. When RSI nears or crosses 70 level and goes below, the signal is that the market is overbought. To confirm RSI signals we use the Bollinger Bands. When the price touches outside Bollinger Bands with deviation 2.0 and 3.0 , it serves as a signal that further price movements are unlikely. In other words, the price has reached its local maximum or minimum, and a correction is probably going to begin. In order to avoid fake price movements and to be sure that the correction really begins the current or next candle should be closed inside the two Bollinger Bands.

Apply this strategy to 6 charts at the same time.

Long entry

Find oversold market using RSI ( Relative Strength Index lines rises to 30 or lower). It indicates that a positive correction of the price is possible. Then the price should cross the lower line of Bollinger Band with standard deviation 3.0, and after that the candle should be closed inside Bollinger Band with standard deviation 2.0. If the candle is up (green color), a long position is opened with a stop loss of local minimum minus 10 points. After position becomes profitable a trailing stop of 10 points is set. A long position will be closed by a stop loss or when the price crosses higher Bollinger Bands standard deviation 2.0) line.

Short entry

Find overbought market with RSI ( Relative Strength Index lines rises to 70 or higher). It indicates that a negative correction is possible. Then the price should cross higher Bollinger Band with standard deviation 3.0, and after that the candle should be closed inside Bollinger Band with standard deviation 2.0. If the candle is down (red color), a long position is opened with a stop loss of local maximum plus 10 points. After position becomes profitable a trailing stop of 10 points is set. A short position will be closed by a stop loss or when the price crosses lower Bollinger Bands (Standard deviation 2.0) line.

Options for stop loss and take profit.

Stop loss below/above the outside bands of the Bollinger Bands with deviation 3.0.

Make profit 2 pips before the middle band.

In the pictures examples  of this trading strategy, three charts  USD/JPY.