Bollinger Bands and MACD Reversal Strategy

The Bollinger Bands and MACD reversal strategy is a classic yet highly effective basic trading approach. Its logic is straightforward: traders wait for specific conditions to align before making their moves.

Setup and Strategy Details

• Timeframe: Suitable for 5 minutes or longer timeframes.

• Currency Pairs: Works well with any pairs, but particularly effective with EUR/GBP, AUD/NZD, and AUD/CHF.

• Trading Style: Applicable for both day trading and swing trading

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  Indicators

  1. Bollinger Bands (25, 2.5)

     Simple Moving Average (SMA) Periods: 9 (applied to the closing prices).

     MACD (Moving Average Convergence Divergence):

     • Parameters: 7, 21, 9

       Trading Rules

  Buy Signal:

  1. When the price touches or exceeds the lower Bollinger Band:

     • Wait for the price to be greater than the 9-period SMA.

       Confirm the buy signal when the MACD crosses upwards.

  Sell Signal:

  1. When the price touches or exceeds the lower Bollinger Band:

     • Wait for the price to be greater than the 9-period SMA.

       Confirm the sell signal when the MACD crosses upwards.

  Risk Management:

  • Stop Loss: Set at the previous swing’s high or low.

    Take Profit: Either at the middle Bollinger Band or with a risk-reward ratio of 1:1.15.

  Remember to adapt this strategy to your risk tolerance and trading preferences. Happy trading!