The strategy has been so reliable that in the end I decided to code an EA in order to test this idea over the last couple of years. The result is pretty interesting since an account can easily double over a 12 months period as shown in this backtest from June to June This volatility indicator is available on the vast majority of trading platforms, including MT4 of course. Bollinger Bands are made up of three lines:.
However blindly selling when price breaks above the upper BB and buying when price breaks below the lower BB is NOT a strategy that can be profitable on any financial instrument and any timeframe.
That means finding a financial instrument, timeframe, reasonable take profit and stop loss levels and some trading filters that in the end make up a complete and reliable trading strategy.
Secondly focus on H1 charts only and evaluate trading signals only when a bar closes. If a H1 bar closes outside the BB, then you can enter a trade in the opposite direction and aim at pips , like shown in the picture below:.
As you can see we have 4 trades 1 short and 3 long: In this case we just try to close the transaction at breakeven or with a small loss. This is a very conservative approach that works best in the long run, because it avoids bad trading scenarios when price continues to go straight in one direction after the BB breakout. We add another short trade only when a candle closes below the median line , and only if the distance from the entry price of the first trade is reasonably big from 20 to 40 pips according to volatility.
Then we close the transaction at breakeven. This example that comes right after the 4 winning trades shown before suggests that we could make a handsome profit also in this situation, however our tests show that the conservative approach closing at breakeven when more than 1 trade must be opened is fairly superior for the overall profitability of this strategy.
Of course OndaFX EA incorporates other rules and automatically adapts to market volatility unless the user wants to specify fixed pip levels , but the strategy is basically built upon the two observations shown above.
You may use these HTML tags and attributes: Bollinger Bands are made up of three lines: If a H1 bar closes outside the BB, then you can enter a trade in the opposite direction and aim at pips , like shown in the picture below: Leave a comment Cancel reply Your email address will not be published.
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