Hey, I just tested your idea and I can actually see the Bollinger squeeze on the shorter timeframe which will make my technical analysis more useful when using Bollinger Bands.
Thank you.
I’m glad you found that helpful. Speaking of period settings, John also has some suggestions on how to set up your ‘supporting’ indicators. He’s discussing this is terms of the Money Flow Index that he uses, but it applies to any confirming indicator, especially the oscillators.
We’ll use the basic Bollinger Band settings of 20 periods and ±2 standard deviations. To set the MFI parameters we’ll employ an old rule: Indicator length should be approximately half the length of the calculation period for the bands. Though the exact origin of this rule is unknown to me, it is likely an adaptation of a rule from cycle analysis that suggests using moving averages a quarter the length of the dominant cycle. Experimentation showed that periods a quarter of the calculation period for the bands were generally too short, but that a half-length period for the indicators worked quite well. As with all things, these are but starting values.
Bollinger, John. Bollinger on Bollinger Bands (p. 157). McGraw-Hill Education. Kindle Edition.
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Trade System for next week 27/11/17 to 02/12/17
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Trade Plan requirement section (Every Monday)
- Road map the economic events weekly, consider my limit of 3-5 trades to prevent overtrading and make a timetable on the ones I want to trade. This will allow me to review my trades, give higher probability trades, trade journal better and incorporate my P/L, R/R & performance metrics better to get ready for live trading.
- Use the mapped out section plus research section to gather fundamental and sentiment of the market.
- This trade plan will allow me to add in performance metrics against R/R & P/L, most importantly review my trade and prevent overtrading.
Mapped out section (D1) – review this section every three weeks.
- Use two demo accounts, one for long term and one for short term.
- Trend currencies AUD/USD, EUR/USD & GBP/USD, Range currencies are AUD/NZD & EUR/CHF.
a. Find major support/resistance. Use line graph.
b. Find ascending, descending or horizontal channels
c. Use Elliot waves. (need to learn) Further my learning
d. Use Fibonacci lines. (need to improve on)
i. In order to apply Fibonacci levels to your charts, you’ll need to identify Swing High and Swing Low points.
ii. Fibonacci Retracement | Know When to Enter a Forex Trade - BabyPips.com
iii. Fibonacci Extensions | Know When to Take Profit in Forex - BabyPips.com
e. Use pivot points. (need to learn) - Consider the Market Phases – Accumulation, Advancing, Distribution and Declining
- Map the trend to provide more visibility and a better long-term perspective on the market.
Research Section (D1 charts) – Every Monday
- Look at the news on babypips, Dailyfx and Fxstreet before trading. Gather Intel. Keep myself updated what is happening in the finance world.
a. Consider the news to look for good opportunities. - Watch Youtube Forex analysis from other traders for the week.
- Look at economic events weekly and consider my 3-5 trades and road map it.
a. Find out which economic event has high impact and see the time it starts. - Focus on AUD/USD, EUR/USD & GBP/USD – other economies affects each other.
a. Look at gold, commodities and stocks eventually. - Get a rough idea of market Sentiment (bullish or bearish, overall view) – dailyfx & Fxstreet.
- If I went past an economic event, look at the previous events and see how the market reacted and gathered the relevant news.
a. https://www.dailyfx.com/calendar
b. Forex Economic Calendar - If not, listen to Bloomberg radio before the economic event to get a slight idea where the market is going, understand market sentiment and fundamentals.
Trade entry section (M15 & H1 Charts)
- Enter a trade only 1 hour after an economic event and close 1 hour before.
a. I will only enter a trade outside of an economic event, if only, I have not met my trade plan requirement of 3-5 trades a week or my drawdown or profit target has not been met yet.
i. If it is outside the economic event, consider the impact and what traders’ expectation is whether it is bullish/bearish or bull/bear exhaustion. (Price action).
a) Secondly, use technical analysis such as MACD, Stochastic, Moving average, Fibonacci and support resistance as secondary inputs in your trading idea.
b. Do not touch the trade after 8 hours or when a high impact economic event will likely change the market sentiment/ fundamentals, only S/L & T/P can be changed. - Some considerations I have learnt from my journal, before my trade look at support/resistance zones and Fibonacci zones to enter my trade for high probability trades. (Line graph consideration)
a. Make S/L and T/P lines to see whether it is a high probability trade, also consider market sentiment + fundamentals (longer term) and whether it is trending or ranging market.
b. Use candlestick formations to see where the bulls and bears are being exhausted and consider trader’s perspective (short term)
Once I figure out whether I am in a trending or ranging market, I will use the below trade strategy and analysis style.
Trend strategy and analysis plan (M15 & H1)
- Note that 12:30 AM every day in AUS is when New York and London session collide. In these periods volatility tends to increase, and research from past economic events has already been considered.
- Use economic news as a trend starter and determine whether it is bearish or bullish.
- If a trend starts without an economic news booster, then consider using the below options.
- Use Moving Average to determine where price is heading. Need to re-read babypip’s section.
- Use RSI + MACD for a trending market learn about divergences
- Find Support/Resistance and also consider that trends usually break these.
- Experiment and learn more on trend lines.
- Experiment and learn more about OBV technical tool.
- Use ADX to determine the strength of the trend.
- set higher S/L + T/P, risk-reward ratio
Ranging strategy and analysis plan (M15 & H1)
- Good times to implement a range strategy would be when economic news and trends have bypassed or visible minor/major resistance/supports. Could look at Bollinger bands to determine it also.
- Find the support and resistance lines and find the range, use support and resistance zones. Look at (M15, H1 & D charts)
- Enter trades in these zones for high probability trade.
- Technical tools to consider - RSI, CCI or Stochastic to see whether it is overbought or sold.
- Use Sell and Buy orders to enter trades.
- Consider risk/reward. (have lower expectations of P/L, therefore create good entry points with high probability + S/L & T/P.
- Use Bollinger bands to determine when the market trend is ending, find other technical analysis also. Once the range market ends, then switch to trend strategy.
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Trade plan
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My current trade plan for the week, 27/11/17 – 2/12/17. Find some news to see market sentiment and fundamentals on these economies.
Economic event table date/time AUS time
Date/Time – Currency, Economic event, Look at technical tool box to make appropriate strategies.
28/11/17 – 21:00PM
EUR/USD EUR OECD economic outlook
29/11/17 – 12:30AM
AUD/USD USD Advance goods trade balance (OCT)
30/11/17 – 12:00AM
EUR/USD EUR German Consumer Price index
30/11/17 – 12:30AM
AUD/USD USD GDP (QoQ) (3Q s)
30/11/17 – 12:00PM
AUD/USD CNY – swift Global Payments CNY
Relevant news + Bloomberg radio consideration – to consider market fundamentals and sentiments.
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Trade Journal 27/11/17
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Trade number 1 (1 hour chart)
a. Currency AUD/USD -
Economic event consideration, close before 29/11/17 – 12:30 AM
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Open trade at 4:40PM 27/11/17 AUS time
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The AUD/USD has a bearish sentiment and fundamentals
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Risk reward ratio – 3:1
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Spread amount 1.5pips
I entered a trade based on keeping it on till 29/11/17 12:00AM, roughly before the news release of USD Advance goods trade balance (OCT).