Bollinger bands are a measurement of the volatility of prices above and below the simple moving average.
The Relative Strength Index (RSI) is a momentum oscillator designed to identify overbought and oversold levels.
Asset prices above 70 are usually considered overbought, while prices under 30 are considered oversold.
The above two definition indicators are the major Indicators needed for this Trading Strategy.
In other to execute profitable winning trade consistently with this strategy, the following indicators is needed;
- BOLLINGER BAND
- RELATIVE STRENGTH INDEX (RSI)
Bollinger Band Indicator Set-up.
Relative Strength Index (RSI) Indicator Set-up
The Bollinger band indicator should be set to 20 Periods and 2 Standard Deviations and the Bollinger band width indicator should be switched on. Also the Relative Strength Index period should be 14, apply to close and lastly the Level should be 70,50,30.
How do I trade it?
Selling Signal
The following conditions is essential before Selling with this Strategy.
- The current Trend of the market must be Downtrend Market Structure
- Market must cross below the middle moving average of the Bollinger Band
- The RSI line must also cross below the 50.00 price level at the same time.
With this strategy, the above three conditions must be satisfied before entering the market in SHORT Position Orders.
Stops should be placed at the high or low of the preceding candle or, to allow for a maximum loss of 3% of your trading capital, whichever is the smaller.
Breakeven or Profit can be taken when the market touches the Buy region, which is at point 70 level of the RSI Indicator.
An example is shown below using AUDUSD, H4 Chart. Firstly the current Trend of the market is Downtrend Market Structure, The arrow pointed in the Chart and in RS1 indicators indicate the spot remaining stated conditions is fully satisfied.
AUDUSD, H4 Chart below shows a massive BEARISH push when a full candle completes below the middle moving average of the Bollinger Band and when the RSI line completes below the entry-level 50.00 simultaneously.
AUDUSD, H4 showing massive BEARISH push in Downtrend direction.
Buying Signal
The following conditions are essential before Buying with this Strategy.
- The trend of the market must be Uptrend Market Structure
- Market must cross below the middle moving average of the Bollinger Band
- The RSI line must also cross below the 50.00 price level at the same time.
This forex trading strategy must satisfy the above conditions before entering the market in LONG Position Orders.
Stops loss should be placed at the high or low of the preceding candle, or, to allow for a maximum loss of 3% of your trading capital, whichever is the smaller.
Breakeven or Profit can be taken when market touch the Sell region which is at point 70 level of the RSI Indicator.
CADJPY, H4(Marker display massive BULLISH push immediately the conditions is satisfied).
An example is shown above using H4 Chart. The arrow pointed on the Chart and RS1 indicators indicate the spot the above-stated essential conditions is satisfied.
CADJPY, H4 Chart above show massive BULLISH push when a full candle completes above the middle moving average of the Bollinger Band and when the RSI line completes above the entry-level 50.00 simultaneously.
This strategy offers a lot of good trading opportunity, which includes;
- Tradable in all time frame
- Offer a good Risk to Reward Ratio
- Provide trader with an Entry signal and Exit or Break-Even signal.
- Suitable for all trades, both newbie and professional forex traders
- It also provides an opportunity to always trade in line with the trend of the market.
- It is a confluence double confirmation (Bollinger band, RSI) trading strategy, thereby boasting Trader confidence.
