This Bollinger Band Forex Trading Strategy Using Dynamic Support And Resistance is a very simple forex trading system to understand and implement.
And it is based on the concept of dynamic support and resistance of the bollinger band lines.
In simple terms:
- dynamic support refers to the fact that price will go down and hit the lower bollinger band line and bounce back up…so that lower bollinger band line is said to be providing the dynamic support to price.
- Now for dynamic resistance, price will go up and hit the upper bollinger band line and then bounce back down.
The chart below shows you examples of dynamic support and resistance on the upper and lower bollinger band lines. Notice how price is hitting these two lines and bouncing back?
Timeframes: try to use 1hr and 4hr timeframes for this trading method.
Currency Pairs: Any
Forex Indicators: Just the bollinger band indicator with default settings.
- Wait for price to hit the lower bollinger band line.
- After the candlestick that hits the lower bollinger band line closes, you place a buy stop order 2-3 pips above its high and Place your stop loss at least 5 pips below its low.
- For take profits, you can use the middle bollinger band line to exit a trade or when price reaches the upper bollinger band line.
- Wait for price to hit the upper bollinger band line.
- After the candlestick that hits the upper bollinger band line closes, you place a sell stop order 2-3 pips below its low and Place your stop loss at least 5 pips above its high.
- For take profits, you can use the middle bollinger band line to exit a trade or when price reaches the lower bollinger band line.
Note: if your pending order is not activated by the next candlestick that forms, keep adjusting your pending order for the next “x” number of candlesticks until your order gets activated
ADDITIONAL TRADE ENTRY CONFIRMATION TECHNIQUE
One better method is only take a trade when the candlestick that touches the bollinger band line is a reliable reversal candlestick pattern.
These candlesticks patterns (click that link) are what you should be looking for if you want to do this.
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