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The Bollinger Bands strategy combines the Support and Resistance indicator to open orders based on a reversal signal. The accuracy of the strategy’s signals is 70%, which is relatively high when trading Fixed Time Trade.
Bollinger Bands combines Support and Resistance
If you do not know the Bollinger Bands indicator, you can read the following article: https://traderrr.com/what-is-bollinger-bands-and-how-to-use-it/
And knowledge of Support and Resistance is also indispensable; you should know through the article below before continuing: https://traderrr.com/support-and-resistance-how-to-find-and-how-to-use-it/
Launch
This strategy is suitable for currency pairs with USD because of the stability of the USD. Based on the low volatility, you can run 1 minute session time with 1 minute fixed time.
Fixed Time Trade with 1 minute fixed time means that you are trading short-term positions, relying on nearby candlestick groups to predict the trend.
And it would be best if you didn’t increase the stake or decrease.
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Opening order signal
Bollinger Bands combine Resistance and Support indicator give the following signal:
Open an up order
A signal appeared when data moved out of the lower band of Bollinger Bands creating a red candle with the closing price just above the support level.
That point is a good time to open a bullish trade, as the price will immediately move back into the Bollinger Bands.
Open a down order
When the price goes out of the upper Band and creates one green candlestick near right below a resistance threshold, you should immediately put a bearish trade.
Time to enter the order
About trading timing, when a signal appears, you should trade as soon as possible following the described point below:
- Candlestick closes outside of the Band and opens a new candle.
- Price is in the Resistance/Support zone.
For example
Some signals may be perfect but have a chance of reverse results, so there are several times you will lose. However, throughout research, it shows that for every 10 orders opened, 7 orders won. So this is a model worth trying because the lower the risk, the more likely you will be profitable. Below is an example of combining Bollinger Bands and Support/Resistance indicators.
- Point (1) indicates that the price closed outside the upper band and near a resistance threshold. But as you can see the strong momentum, the signal candlestick is too long. Likely, it will not reverse. Try to open a bearish order, but the result is negative. Losses: 1.
- At point (2), the price again crossed the upper Band and hit a resistance. You open the order as usual because this point is safe. Wins: 1.
- At point (3), the price closed outside the lower band but was not near any support threshold. It is best not to open orders.
- Point (4) is now perfect, as it hits the support level, low momentum, closed outside the lower Band. This is a classic sign of a trend reversal to put a bullish trade. Wins: 2.
In such a short session, hit 3 orders and gave very positive results, 2 wins 1 lose. At point (1) there is strange fluctuation, strong motivation. This signal should not be open for trading. So if the better case is, you can win 2 or 3 with 0 loss.
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The disadvantage
Open a short position
For traders, a 60 second FTT order is minimal and risky. Because in a short time, it will not be possible to grasp the market perfectly. So this way of fighting, the win rate is only 70% after a series of calculations.
Besides, earning money too quickly after making a decision will create greed. Increase the bet regardless.
The risks of trend reversal trading
You trade on a safe currency pair, but the way of focusing on trend reversal movements is hard to say stability here. Sometimes reversal is just because many investors suddenly sell/buy in bulk.
The reversal trading requires patience, a strong mentality. The prerequisite is no stuffing and increasing bets when trading in reverse mode. This rule helps you avoid losing everything.
Traderrr recommends that you keep track of 3 to 4 currency pairs, and there should be a limit of 8 orders per currency pair. This rule will help you avoid risk as much as possible.
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Other indicators associated with Bollinger Bands :
https://traderrr.com/combine-pin-bar-with-bollinger-bands-trading-strategy/
https://traderrr.com/relative-strength-index-rsi-bollinger-bands-bb-trading-strategy/
