Trading on 1 hr chart: swing trading with Bollinger Bands

Trading on 1 hr chart is a swing trading style based on Bollinger Bands. And as you know, swing trading is much different than day trading.
Day Trading requires much deeper concentration since each trade lasts for few minutes to a maximum of few hrs at the most. So, you need to be quick in identifying the trading opportunity and reacting to it. Swing trading on the other hand will give you some breathing space to
Entering the trade
a. Currency pairs – All USD based currency pairs.
b. Indicators used –
• Candlesticks
• Bollinger Bands – 1. setting of 20 period with deviation 2,
2. setting of 10 period with deviation of 2.
• Stochastic RSI – setting 18, 2, 2
• 200 EMA
For stochastic RSI, even the 14,3 setting would have worked well, But after testing more than 50 settings, I felt that 18,2 work the best.
Here are the rules of the trade for trading on a 1 hr chart, which are quite
1. The low of current candle and previous two candles should not be the lowest point in the last 30 candles.
2. The current or the previous 2 candles should have created a lowest low in the last 7-8 candles, but should not have the highest value in last 7-8 candles.
3. The Difference between highest point and lowest point in last 10 candles should be 45 or more Pips.
4. Confirmation Indicators
• The Stochastic RSI oscillator should have value of 40 or below
• The 10 period UPPER bollinger band should be Inside (or let us say “Below”) or should have same value as the 20 period Upper Bollinger band
As soon as you find a setup which meets above rules, we’ll enter the trade after below mentioned guideline is met -
We can enter the trade as soon as the price goes past the mid-point of range of last 3 candles.
IMP: This cross of the midpoint of the range should happen within next 3 candles for the trade to be taken. Else the setup is not Valid and you must wait for next setup.
Just to mention again, “range” here is calculated as difference between highest high of last 3 candles and their lowest low.
So for example if in last 3 candles, the highest high has been 1.4000 and lowest low is 1.3940, then range is 60 pips. As soon as price crosses range’s mid point which is 60/2 = 30 pips, we can open a trade.
If you look at above chart, Point A and Point B present good trading
But if you look at Point C, it doesn’t. Why?
Because Point C made the lowest low in last 30 Candles and also the stochastic RSI is not below 40. Infact it is more than 60.
The above chart shows 3 trade setups –
1. The 1st trade set up starts at point A where all the entry rules as values of confirmation indicators meet.
As soon as trade is entered, the stop loss is placed 25 pips below the low of the candle at that time.
As soon as the trade is 35 pips in profit, the stop loss is moved to entry price.
So from now on your trade can never end in loss.
From there on keep moving stop loss every 20 pips towards the direction of trade.
This trade would have ended at point 1 with 20 pips profit.
2. Same rules as above. The trade would have opened at point 2.
This trade would have made 210 pips and would have ended at point 2 where the market would have hit the trailing stop loss.
3. The 3 rd trade setup is at point C which would have ended at point 3 with
60 pips profit!
As you can see the system is highly reliable and is very straight forward in use. Once you practice with few times, you’ll start spotting the trade setups in matter of 30-35 seconds!
The above chart covers 2 trades on USD/JPY currency pair.
1. The 1 st trade is marked at point A meets all the trading rules. It exits at point A when the market touches the trailing stop loss. It ends with 120 pips profit!
2. The 2 nd trade ends starts at Point B and finishes at point 2 with amazing 260 pips profit.
Remember, such high profits are possible only when you adhere to the money management principle which is a key to have profitable trades!
Money Management Rules.
Here are the money management rules for trading on 1 hr chart. Please go through these carefully –
1. As soon as you open the trade, place the stop loss 25 pips below the entry price. But your stop loss should not be more than 55 pips away from entry price.
2. Once you are 35 pips in profit, move your stop loss to entry price.
3. From there on, keep moving your trailing stop loss every 20 pips in the direction of trade.
4. You can exit the trade by following any of these exit strategies –
a. 1 st Exit strategy can be that as soon as you reach profit of 90 pips you can close the trade
b. The other exit strategy is that you can keep your trade running and till the time market reverses and hits your trailing stop loss
Note: A quick note I’ll make here is that I would recommend you to use exit strategy 2 since on 1 hr chart there can be some runs that can fetch more than 200 pips!
Also, be careful when the market reaches 200 EMA. If there is any sign of reversal when currency pair touches 200 EMA, close the trade immediately.


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