This is a forex trading strategy for trading the middle bollinger band indicator. There are 3 lines in a bollinger band indicator, the upper line, the middle line and the lower line.
With This Middle Bollinger Band Forex Trading Strategy, the middle bollinger band is being used for trade entries when a candlestick touches it (or touches it an closes).
Here’s how it works: [sociallocker]
- when the bollinger band is pointing up…or is sloping upwards, you look to buy.
- when the bollinger band is pointing down…or is sloping downward, you look to sell.
- you use the middle bollinger band for buying or selling…not the outside bollinger band lines.
Bollinger Band Settings:
If you are using metatrader4 Trading platfrom, use default settings like shown here:
MIDDLE BOLLINGER BAND FOREX TRADING STRATEGY IN DETAIL AND THE TRADING RULE
Here’s how this forex trading system works for and uptrend situation where you are looking to buy:
- when in an uptrend, the bollinger band lines will be pointing upwards
- so you wait until price comes down and touches the middle bollinger band line
- when price comes and touches the middle bollinger band line, you can either buy instantly as soon as the middle bollinger band is touches
- or you wait until the candlestick that touches the middle bollinger band closes, then you initiate a buy order.
WHERE WOULD YOU PLACE YOUR STOP LOSS FOR A BUY ORDER?
- now for stop loss, if you place a buy order at the touch of the middle bollinger band line, then you best option for stop loss is to place it where the lower bollinger band line is and as soon as that candlestick closes and if the distance is too large then move you stop loss at least 5-15 pips below the low of then entry candlestick.
- Or if you place a buy trade after the close of the first candlestick that touched the middle bollinger band line then your best option is to place your stop loss at least 5-10 pips below the low of that entry candlestick.
SHORT ENTRY RULES
- the bollinger band must be sloping down
- wait for price to go back up to touch the middle bollinger band line
- sell immediately at the touch of the middle bollinger band line
- or sell after the candlestick has closed.
WHERE TO PLACE THE STOP LOSS FOR A SELL ORDER
- place your stop loss at the same levels as the top bollinger band line
- or place your stop loss 5-15 pips above the high of the entry candlestick.
WHERE TO TAKE PROFITS?
Here are a couple of options on where you can take your profit:
- if its a buy trade, take profit as soon as a candlestick touches the top bollinger band line.
- if its a sell trade, take profit when a candlestick touches the lower bollinger band line.
Or your can trail stop your profitable sell trades by moving stop loss behind the high of every candlestick until you get stopped.
Similarly you can trail stop your profitable buy trades by moving stop loss behind the low of every candlestick until you get stopped out.
SUMMARY OF THE MIDDLE BOLLINGER BAND FOREX TRADING STRATEGY
- This is a very simple forex trading system for beggineer forex traders to use.
- If you are a forex scalper and love to trade in smaller timeframes then this forex strategy can be used as forex scalping system where you can trade from 1minute up to 5minute timeframes.
- This middle bollinger band forex trading strategy is also a good swing trading strategy to use with 4hr and daily charts.
- Avoid trading when bollinger band constricts and narrows as this may cause so many false signals.
- Consider using reversal candlestick patterns for trade entry confirmation as well.
- A nice trading market will give you good opportunities to make good profits.
- Don’t forget, you cannot win all the time, you win some, you lose some, but as long as your losses are small and your wins are big then you are doing fine.