Double Bollinger Bands Breakout

The Double Bollinger Bands Breakout strategy is based on changes in the movement of the candles of price and the indicators of Bollinger Bands (BB). The probability of success is quite high.

The trading strategy adopted by luckscout.com is based only on changes in the formation of the candles movements and the Bollinger band indicators, so it is easy to analyze with a simple display. The probability of success is quite high, as long as the entrance complies with the required conditions. To be more precise, it can be combined with price action analysis or candlestick movement patterns. Strategic setting of double Bollinger bands This strategy uses only two Bollinger band indicators (BB) with different parameter settings for each deviation. If you use the Metatrader trading platform, the parameters of the first BB indicator are set to the default value, that is, period 20, deviations 2, shift 0 and apply to close. While the second BB is set for period 20, deviations 1, move 0 and apply to close.

The Double Bollinger Bands strategy is used in a daily time interval or 4 hours (H4). The following image will appear:

In the figure above, the first BB is blue with deviation 2 while the second BB with deviation 1 is red. The curves of the middle band for the two BBs look the same, only the deviation settings are different, so the upper band and lower band are both different. The distance of the two curves in BB with minor deviations (according to BB) will be narrower. The basic principle of this strategy is to detect trends in changes in price movement after the consolidation of the upper or lower band of the BB indicator band. However, this strategy is not only used in trendy conditions, but can also be applied in side or extension conditions. Using the Bollinger double-band strategy The following conditions indicate a signal to buy or sell from the Double Bollinger Bands Breakout strategy: Signals to buy: To open a purchase position, you must wait until the closing price of the candlestick bar is above the curve of the upper band of BB whose deviation is 1. The next condition is the closing price of two candle bars which previously had to be below the curve of the upper band of the BB indicator whose deviation is 1. Terms this shows the market participants who agreed to continue the upward trend after the previous consolidation. Here is an example on the daily USD / JPY:

in the table above it seems that the price of the candlestick bar 3 closes above the curve of the upper band of the BB indicator whose deviation is 1 (red), and the prices of the two previous bars of the candlestick (1 and 2) close under the upper band curve BB indicator. If this condition occurs, it is possible to open long positions at the closing price of the candlestick bar 3. From the analysis of the price action, it seems that the bar of the candlestick 2 is inside the bar which indicates a state of consolidation and, after the highest level of the mother bar (candlestick 1) has been broken, it is confirmed that market participants have decided to continue the uptrend. This state of consolidation is also reflected in the fact that the upper band curve of the BB indicator has not yet been interrupted. Determining Stop Loss and Target Profit Levels In the daily USD / JPY example above, the Stop Loss can be determined at the lowest level of the 3 candlestick bar and the target profit can be determined at least equal to the distance of the Stop Loss or, if possible, try to be greater so that the risk / return ratio can be greater than 1: 1. If the trend is still strong, you can use the Trailing Stop function with a pip trailing (point) for the stop loss, or move the Stop Loss level if it has reached a draw. To find out the strength of trends you can with the ADX indicator (see also: Measuring the strength of trends with the ADX indicators). Another example that shows a sign for the purchase:

In the EUR / USD chart above, the price of the candlestick bar 3 closes above the curve of the upper band of the BB 1 deviation indicator while the prices of the candlestick bar 1 and 2 close down so you can open long positions at the closing level of the candlestick bar 3. Candlestick 2 is an internal bar that shows the state of consolidation. Signal to sell: To open short positions, it is necessary to wait until the closing price of the candlestick bar is lower than the curve of the lower band of BB whose deviation is 1. The next condition is the closing price of two bars of the candle that previously had to be above the curve of the lower band of the BB indicator whose deviation 1. This condition shows the market participants who agreed to continue the downward trend after the previous consolidation. Here is a daily example of EUR / USD:

from the graph above it appears that the price of the candlestick bar 3 closes under the curve of the lower band of the BB indicator whose deviation is 1 (red), and the prices of the two previous candelabra bars (1 and 2) close above the indicator curve lower band BB. If this condition occurs, it is possible to open short positions at the closing price of the candlestick bar 3. From the analysis of the price action, it seems that the bars 1 and 2 of the candlestick are inside bars that indicate a state of consolidation, and after that the lowest level of the mother bar (candlestick before the bar 1) was confirmed, it is confirmed that market operators have decided to continue the downward trend. The way to determine the goal of stop loss and profit is the same as in the previous example. Maximize profits with the Double Bollinger Bands Breakout strategy As explained above, the basic principle of using this strategy is to detect the direction of the trend that occurs after consolidation, in order to take advantage of the strong trend movements to maximize profits. With this strategy it is possible to open 2 positions equal to the profit objective of the first position as in the previous example (at least equal to the stop loss distance or more), while the profit target of the second position is not determined because it is assumed that the price will move with a strong trend after consolidation. If the profit target of the first position has been reached, move the stop loss level of the second position to the breakeven level and maintain that position. Here is an example of long positions on USD / JPY daily:

keep your buying position as long as price movements are still between the upper band curves of the two BB indicators, or even above the average band curve. It is possible to close the purchase position when the price movement begins to pierce the BB curve of the upper band whose deviation is 1 (level A) or if the price has exceeded the average band curve (level B). Similarly, here is an example of short positions on EUR / USD per day: