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Short-Term Forex Trading Strategy: Bollinger Reversal

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    Short-Term Forex Trading Strategy: Bollinger Reversal

    You might already be familiar with Bollinger Bands. Maybe it's also been used in doing forex trading.

    This time I will discuss one of the forex trading strategies that use Bollinger Band in a simple mechanical trading system for short-term transactions.

    In this simple strategy, Bollinger Bands work to look for a reversal in a trend.

    You might already know that lines on Bollinger Bands can be used as an area of ​​dynamic support and resistance.

    Unlike other trend-based indicators, the existence of the upper and lower bands in Bollinger Band makes this indicator can be used when the sideway market, of course with certain technologies that will be discussed in this article.

    Interestingly, the technique I will describe this time is quite effective when used in sideway, or trending conditions that are not too steep.

    But beware because sideway conditions are usually followed by narrowing of Bollinger Bands (Bollinger squeeze). Squeeze is quite often followed by a rally after the upper or lower penetration band.

    To minimize the risk, this technique also includes one of the oscillator indicators, namely RSI which can provide early information about overbought or oversold conditions.

    The use of RSI is expected to be able to provide a better filter.

    As a forex trading signal to make transactions, this strategy utilizes the appearance of a candlestick pattern that shows a false-break above the upper band, or below the lower band.

    Of course this technique can only promise short-term rebound potential. Thus, the placement of target profit (TP) cannot be too far away.

    OK, without the need for length, the following explanation is the rule of use of this strategy.

    Pair: a currency pair that is not too volatile, is recommended in USDCAD.

    Time frame: H1 and above

    Technical Indicators:

    Bollinger Band:
    Period: 50
    Deviations: 2
    Apply to: close
    Period: 5
    Apply to: close
    Trading Signals:

    1. Sell signals:
    If the high price of the reference candlestick is higher than the upper band and the close price is below the upper band.
    RSI has crossed from above 75 (down).

    2. Buy signals:
    If the low price of the candlestick used as a reference is lower than the lower band and the close price is above the lower band.
    RSI has crossed from below 25 (upwards).

    3. Exit strategy:

    Place SL as far as 50 pips above the reference candlestick high
    TP placement:
    Target I: middle band
    Target II: lower band (for short positions) / upper band (for long positions)
    Tip: if the price has touched the first target, it is recommended to activate trailing stop or partially close (partial close)

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