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:
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