Entry with Bollinger Band Width

Trading Systems Free Forex Trading Systems
1

Hi All,

I’ve been using this very simple system of the EUR/USD for a few months now and so far I like the results. I’m posting here to see if anyone had any suggestions for improving it.

If your charting software has the Bollinger Band Width indicator (set at the 20 period SMA like normal Bollinger Band lines), it will be easier to use this system. The theory here is that once the BB_Width gets to a relatively low number (ie., price stagnates), the price will soon move up or down with high volatility. Question is, once price stagnates for a while, will it move up or down? I answer the question by checking the daily chart and see if the trend is up or down. I will go Long or Short depending on where the trend is up (Long) or down (Short). If I can’t look at the daily chart and answer whether the trend is up or down, I will not trade.

Time Frame: 1 Hour for the trigger, Daily to determine Long or Short

Set-up for Long:

  • The Bollinger Band Width is at or below its [B]Lowest Low Value[/B] for the past 21 hours
  • The price on the 1 Hour chart is BELOW the 100 SMA (we’re saying that the “correction” of the Uptrend has run out of steam, but still moved enough)
  • The trend is UP on the Daily Chart
  • Enter Long.
  • Stop-Loss: If the price is ABOVE the 200SMA, then the SL is 20 points BELOW the 200SMA. Otherwise, use the next major Pivot Point Support line (I calculate by Pivot Points using the close at 17:00 EST).
  • Take Profit: Close half the position at the Central Pivot Line. Use a trailing stop set at 10 pips + the distance between the Pivot Line and the first pivot point support line.

Set-up for Short:

  • The Bollinger Band Width is at or below its [B]Lowest Low Value[/B] for the past 21 hours
  • The price on the 1 Hour chart is ABOVE the 100 SMA
  • The trend is DOWN on the Daily Chart
  • Enter Short.
  • Stop-Loss: If the price is BELOW the 200SMA, then the SL is 20 points BELOW the 200SMA. Otherwise, use the next major Pivot Point Resistance line.
  • Take Profit: Close half the position at the Central Pivot Line. Use a trailing stop set at 10 pips + the distance between the Pivot Line and the first pivot point resistance line.

If anyone has any suggestions for improvements on this system, please send them my way. Also, if anyone knows of any other system that uses a prolonged stall in price as a set-up, please let me know.

Thanks