Bollingerbands intraday strategy

[misterboy]

Heres a strategy that I got from a webinar and I've seen it works quite well. Now to make sure it works, it has to be non-trending market. So its best to trade during the slow hours.

Here it goes:

Open a EUR/USD charts (I like EUR/USD because I know when its quiet) and put bollinger bands with settings of 3,2 (3 period MA and 2 std. deviations, setting of 5,2 works too) on a 15 minute chart. Now make sure when you start the bands arn't in a clear up or down pattern. Then simply wait for the price to hit the top band to go short and for the price to hit the bottom band to go long. Aim for about 10-15 pips/trade. As for the stops, large stops work best..about 30-35. The success rate is high so the win/loss ratio is not a big concern.

 

[da-net]

Thanks for the strategy you picked up @ the webinar. Could you share the webinar name or site so that they can get credit for it ?

A few things that I have done to make this a little better for me personally. I trade it using 5 min charts currently but considering 3 minute charts. I do not like the idea of such a large SL so to control this i use an ATR 5 to get an idea of how big the SL needs to be, but I never exceed 15 pips incl spread. I would rather take the loss and reenter as needed if my bias is still good. I also look @ higher timeframes to confirm. Plus use an oscillator set to 5 periods as a confirmation tool only.

I trade this on a MT4 platform and have started using the order box extensively to monitor & adjust Stops to reduce losses or lock in profits by using the tick data chart and staying 1 to 2 levels back. As it approaches the end of the move I tighten to 4 pips typically. This eliminates the need of a fixed 15 pip TP which it has exceeded many times.

 

[misterboy]

Thanks for the strategy you picked up @ the webinar. Could you share the webinar name or site so that they can get credit for it ?

A few things that I have done to make this a little better for me personally. I trade it using 5 min charts currently but considering 3 minute charts. I do not like the idea of such a large SL so to control this i use an ATR 5 to get an idea of how big the SL needs to be, but I never exceed 15 pips incl spread. I would rather take the loss and reenter as needed if my bias is still good. I also look @ higher timeframes to confirm. Plus use an oscillator set to 5 periods as a confirmation tool only.

I trade this on a MT4 platform and have started using the order box extensively to monitor & adjust Stops to reduce losses or lock in profits by using the tick data chart and staying 1 to 2 levels back. As it approaches the end of the move I tighten to 4 pips typically. This eliminates the need of a fixed 15 pip TP which it has exceeded many times.

Sure. It was on FXSTREET.COM

Heres the exact link:
FXstreet.com Live Sessions Archives: Day Trading in the Forex and Related Markets: A Profitable Trading Strategy for the Futures and Forex Markets

If this is not the one, jsut look through the archives. Its one from the day trading series. Cheers!

 

[timsk]

The same strat' is explained here in greater detail by 30XTCi:
http://www.trade2win.com/boards/forex-strategies-systems/33407-can-anyone-recommend-strategy.html
It does have merit but, like all indicator based strategies, to enter trades blindly because price has hit or crossed a line without any real understanding of what is going on, is a recipe for disaster. As misterboy points out, this won't work in a trending market but, equally important to understand is that Bollinger Bands are based on volatility. Current market conditions fluctuate wildly from low volatility through to unprecedented volatility (usually as a result of news). Therefore, anyone wanting to employ this strategy in the current market is advised to apply extreme caution - even more so than usual.
Just my 2p worth.
Tim.

 

[misterboy]

The same strat' is explained here in greater detail by 30XTCi:
http://www.trade2win.com/boards/forex-strategies-systems/33407-can-anyone-recommend-strategy.html
It does have merit but, like all indicator based strategies, to enter trades blindly because price has hit or crossed a line without any real understanding of what is going on, is a recipe for disaster. As misterboy points out, this won't work in a trending market but, equally important to understand is that Bollinger Bands are based on volatility. Current market conditions fluctuate wildly from low volatility through to unprecedented volatility (usually as a result of news). Therefore, anyone wanting to employ this strategy in the current market is advised to apply extreme caution - even more so than usual.
Just my 2p worth.
Tim.

Yup. Thats very true

 

[RichJM]

Heres a strategy that I got from a webinar and I've seen it works quite well. Now to make sure it works, it has to be non-trending market. So its best to trade during the slow hours.

Here it goes:

Open a EUR/USD charts (I like EUR/USD because I know when its quiet) and put bollinger bands with settings of 3,2 (3 period MA and 2 std. deviations, setting of 5,2 works too) on a 15 minute chart. Now make sure when you start the bands arn't in a clear up or down pattern. Then simply wait for the price to hit the top band to go short and for the price to hit the bottom band to go long. Aim for about 10-15 pips/trade. As for the stops, large stops work best..about 30-35. The success rate is high so the win/loss ratio is not a big concern.

try different setting
bb21 dev 3. that is even better. You be surprise.

 

[misterboy]

try different setting
bb21 dev 3. that is even better. You be surprise.

I'll try it. What TF do you use it for?

 

[apmf]

The same strat' is explained here in greater detail by 30XTCi:
http://www.trade2win.com/boards/forex-strategies-systems/33407-can-anyone-recommend-strategy.html
It does have merit but, like all indicator based strategies, to enter trades blindly because price has hit or crossed a line without any real understanding of what is going on, is a recipe for disaster. As misterboy points out, this won't work in a trending market but, equally important to understand is that Bollinger Bands are based on volatility. Current market conditions fluctuate wildly from low volatility through to unprecedented volatility (usually as a result of news). Therefore, anyone wanting to employ this strategy in the current market is advised to apply extreme caution - even more so than usual.
Just my 2p worth.
Tim.

Hi Tim,
I am trying understand what do you actually mean, but can you please explain me what is the best way to learn price action?? I personally think it will really take years to learn the actual concepts but to put my feets wet into system/strategic trading what should a newbie do in order to understand concepts? I have read some good books on TA and moneymanagemnt, followed many charts but nothing seems to really work out as I am getting confused day by day, so what should be the order? I am already in this business since 1 year.Should i just stick with finding price patterns and breakouts??
Thanks

 

[timsk]

Hi Tim,
I am trying understand what do you actually mean, but can you please explain me what is the best way to learn price action?? I personally think it will really take years to learn the actual concepts but to put my feets wet into system/strategic trading what should a newbie do in order to understand concepts? I have read some good books on TA and moneymanagemnt, followed many charts but nothing seems to really work out as I am getting confused day by day, so what should be the order? I am already in this business since 1 year.Should i just stick with finding price patterns and breakouts??
Thanks

Hi apmf,
Apologies if my post wasn't clear - I'll try to explain. Price (of any instrument anywhere) doesn't know or care about the indicators traders have on their charts. Take two traders, A and B, both trading the same instrument in the same timeframe. There are so many indicators and different ways of interpreting them, that trader A could have a 'signal' to buy at the exact same moment that trader B has a 'signal' to sell. Let's say that trader A really understands the indicator, how and why it works the way it does, as well as its strengths and weaknesses (i.e when to trust it and when to ignore it). Trader B, on the other hand, has just stumbled across an internet forum like this one and read a post which says 'sell when price crosses the upper Bollinger Band set to 3 standard deviations' - or some such. Trader A is going to take money off trader B every time. I recommend that you just study or sim' trade until you're able to identify more with trader A than trader B!

As for your broader question of the best way to learn price action - there is only one way . . . watch it live until your eyes bleed. I went to a very dodgy school where the rugby coach was a hard man. On the first day of the winter term, we didn't touch a rugby ball once. We trained and we trained and we trained. And we carried on training until someone - eventually - threw up. That's how the coach knew we'd had enough. Without wanting to depress you, I've been following my own advice for nigh on six years and I'm still a bit crap at it.

As to what you do next, I'm afraid that in spite of my 'T2W Advisor' status, it would be wrong of me to tell you what to do. The best I can do is offer some general advice. Find a strategy that broadly fits with the way you trade - or want to trade. The one on this thread is fine - and treat it as a starting point only. Add the Bolly bands and moving averages to your charts and observe price behavior. Look at the charts where the indicator 'worked' and the ones where it didn't. What have they in common? Once you have a basic strategy in place, you can work that into an overall trading plan. (Click on the link under my name for a template). As you start to do this, likely as not you'll have questions. You can either start your own journal and post questions there - so everything is in one place - or you can post on existing threads in the appropriate forums. It ain't easy, and the frustration is unbearable at times, but with patience and persistence you will definitely make progress and the dense fog that surrounds you now will start to lift!
Tim.

 

[apmf]

Hi apmf,
Apologies if my post wasn't clear - I'll try to explain. Price (of any instrument anywhere) doesn't know or care about the indicators traders have on their charts. Take two traders, A and B, both trading the same instrument in the same timeframe. There are so many indicators and different ways of interpreting them, that trader A could have a 'signal' to buy at the exact same moment that trader B has a 'signal' to sell. Let's say that trader A really understands the indicator, how and why it works the way it does, as well as its strengths and weaknesses (i.e when to trust it and when to ignore it). Trader B, on the other hand, has just stumbled across an internet forum like this one and read a post which says 'sell when price crosses the upper Bollinger Band set to 3 standard deviations' - or some such. Trader A is going to take money off trader B every time. I recommend that you just study or sim' trade until you're able to identify more with trader A than trader B!

As for your broader question of the best way to learn price action - there is only one way . . . watch it live until your eyes bleed. I went to a very dodgy school where the rugby coach was a hard man. On the first day of the winter term, we didn't touch a rugby ball once. We trained and we trained and we trained. And we carried on training until someone - eventually - threw up. That's how the coach knew we'd had enough. Without wanting to depress you, I've been following my own advice for nigh on six years and I'm still a bit crap at it.

As to what you do next, I'm afraid that in spite of my 'T2W Advisor' status, it would be wrong of me to tell you what to do. The best I can do is offer some general advice. Find a strategy that broadly fits with the way you trade - or want to trade. The one on this thread is fine - and treat it as a starting point only. Add the Bolly bands and moving averages to your charts and observe price behavior. Look at the charts where the indicator 'worked' and the ones where it didn't. What have they in common? Once you have a basic strategy in place, you can work that into an overall trading plan. (Click on the link under my name for a template). As you start to do this, likely as not you'll have questions. You can either start your own journal and post questions there - so everything is in one place - or you can post on existing threads in the appropriate forums. It ain't easy, and the frustration is unbearable at times, but with patience and persistence you will definitely make progress and the dense fog that surrounds you now will start to lift!
Tim.

Thanks so much, that was really sincere and honest advice that I can ever get. So I have started using the BB on a 15min TF as mentioned on 30xti´s thread, I have tried to place my entry only when the prices actually comes out of the 3rd deviation. I only enter with half of my position size which is allowed by my MM rule, I do add the rest half if next candle make a large move above from the upper band or below in case of lowerBB, the idea is if the prices moves more outside of the band then the 5ema is so fast that it moves above the entry point leaving the trade with very less room or profit, i do know that prices should come inside the band and meet the 5EMA, so I average my entry by adding on to a loosing position (i know it is against the rule but working out well for me so far), I exit as soon as prices touch the 5ema.
I am trading on a onada simualtor platform and concentrating on eur/gbp, eur/usd, usd/yen, gbp/usd currency pairs. My leverage is maximum 3 times the capital.
I can see that when prices are in a steep trend then there are huge losses and generally prices touches and closes several times outside the 3rd deviation, I dont know what to do, but I quickly take some loss and exit starightaway, I tried looking at different TFs but not finding a clue yet.
Tim what do I need to do when I see a nice triangle formation inside the bands, I know it is not in my strategy but can I use that breakout opportunity??
Thanks a million for your efforts and time.

 

[timsk]

Hi apmf,

. . . i do know that prices should come inside the band and meet the 5EMA, so I average my entry by adding on to a loosing position (i know it is against the rule but working out well for me so far), I exit as soon as prices touch the 5ema.

99 out of 100 traders will recommend that you don't 'average down' - as it's known - in the strongest terms possible. Officially, with my T2W Advisor hat on - I'd say the same thing - don't do it. However, very occasionally, under specific circumstances I do it myself on a stock that I trade most days. But I know how the stock moves and I plan to do it in advance - it's not a knee jerk reaction when the trade goes against me. Whatever you do, make sure you have a stop loss where you exit the trade without hesitation and exceeding your maximum permissable loss (i.e 1% of total equity) - if the trade fails. Continually adding to a position that's going against you only has to happen once for you to blow your whole account. I know, I've done it.

. I am trading on a onada simualtor platform and concentrating on eur/gbp, eur/usd, usd/yen, gbp/usd currency pairs. My leverage is maximum 3 times the capital.
I can see that when prices are in a steep trend then there are huge losses and generally prices touches and closes several times outside the 3rd deviation, I dont know what to do, but I quickly take some loss and exit starightaway, I tried looking at different TFs but not finding a clue yet.

You should never get "huge losses" if your stop loss is a fixed percentage of your total equity. If you do, this can only mean that you're not adhering to your stops and/or you're risking way too much on any one trade. In the example you mention above, this is where price has broken out of a range on sudden increased volatility and is trending strongly. Trying to fade this move is like standing in front of a freight train. You must learn to recognise these conditions and stand aside - or jump on board and ride the momentum. Research Bollinger Band 'Squeeze'.

. Tim what do I need to do when I see a nice triangle formation inside the bands, I know it is not in my strategy but can I use that breakout opportunity?

Do you juggle (balls, I mean)? I learnt some years ago. You start by throwing just one ball from left hand to right hand and back again, repeatedly. Only when you can do this comfortably, producing a nice even arc with each throw do you introduce a second ball. The point is - ignore other patterns - at least in terms of trying to trade them. Observe them and note what impact they have on the pattern / strategy you're starting with. For example, triangles (and specifically hinges, aka 'springboards') are typical patterns found in a Bolly Band squeeze, so they are important to recognisee for this strategy. This may help:
http://www.trade2win.com/boards/price-volume/29313-springboard.html
If you have more questions (that's fine), I urge you to post a chart to illustrate your comments - a picture paints a thousand words and all that.
Tim.

 

[apmf]

Hi apmf,

99 out of 100 traders will recommend that you don't 'average down' - as it's known - in the strongest terms possible. Officially, with my T2W Advisor hat on - I'd say the same thing - don't do it. However, very occasionally, under specific circumstances I do it myself on a stock that I trade most days. But I know how the stock moves and I plan to do it in advance - it's not a knee jerk reaction when the trade goes against me. Whatever you do, make sure you have a stop loss where you exit the trade without hesitation and exceeding your maximum permissable loss (i.e 1% of total equity) - if the trade fails. Continually adding to a position that's going against you only has to happen once for you to blow your whole account. I know, I've done it.


You should never get "huge losses" if your stop loss is a fixed percentage of your total equity. If you do, this can only mean that you're not adhering to your stops and/or you're risking way too much on any one trade. In the example you mention above, this is where price has broken out of a range on sudden increased volatility and is trending strongly. Trying to fade this move is like standing in front of a freight train. You must learn to recognise these conditions and stand aside - or jump on board and ride the momentum. Research Bollinger Band 'Squeeze'.


Do you juggle (balls, I mean)? I learnt some years ago. You start by throwing just one ball from left hand to right hand and back again, repeatedly. Only when you can do this comfortably, producing a nice even arc with each throw do you introduce a second ball. The point is - ignore other patterns - at least in terms of trying to trade them. Observe them and note what impact they have on the pattern / strategy you're starting with. For example, triangles (and specifically hinges, aka 'springboards') are typical patterns found in a Bolly Band squeeze, so they are important to recognisee for this strategy. This may help:
http://www.trade2win.com/boards/price-volume/29313-springboard.html
If you have more questions (that's fine), I urge you to post a chart to illustrate your comments - a picture paints a thousand words and all that.
Tim.

Thanks once again Tim for your lovely advices, I will try to follow it. As I am trading on oanda fx simulator account, I have limited features with the chart etc so cannot post the chart or if you know is there any way I can post those charts?? Anyway I was looking for sharescope pro so should be fine. Thanks for the advice anyway.
Cheers!

 

[Doctor Leo]

My 2 cents:

you're still in the beginning of learning trading and thus you're all into some bands, averages and other stuff, more or less complicated. But from what I've read here I can see that you don't understand what all these indicators are intended for, what they actually show. I think the best for you would be first to stop trading completely and dedicate all of your time to studying the market you're going to trade. Remember that price is not an abstract inconceivable essence, but there are real people behind it. So try to figure out what those people are likely to do when you see this or that price pattern. What it means in terms of reason to buy or sell from others' point of view. Back to indicators - put away all the stuff you've picked from books and try to realize what, say, a moving average actually shows and why sometimes those notorious crossovers work and sometimes not. People writing books in glossy covers about TA always omit this point reducing all discussion only to a phrase like "there's a need for some other indicator to approve this one's signal" - mere bull****. As to Bollinger bands - google around for the original John Bollinger's book where he clearly explains what his indicator is intended for. I think you'll have to re-build all your conceptions about how and what to trade.

Good luck.

 

[apmf]

My 2 cents:

I think the best for you would be first to stop trading completely and dedicate all of your time to studying the market you're going to trade. Remember that price is not an abstract inconceivable essence, but there are real people behind it. So try to figure out what those people are likely to do when you see this or that price pattern. What it means in terms of reason to buy or sell from others' point of view.

Thanks for your words of wisdom, yes you guessed right, I am still a ultra newbie. So are you telling me to stop even papertrading which I am doing right now?? Personally felt that bookish knowledge can provide the base but I could learn better screen watching, I am trying to read as many charts as possible, I have the eagerness to learn the reasons behind each patterns or the price action or what the big sharks are thinking at any given situation but for that I need to trade the market to understand the psychology atleast in a demo account if not live account that is what my thinking is, please correct me if I am wrong. As Tim advices, I am trying to follow one strategy (trend fading) so that I can improve my discipline to stick with a system and if possible optimize it according to my personality. May be I am absolutely wrong by picking up an indicator based startegy so should I start with price action and price patterns?? I am also spending time reading and definitely will look John Bollinger´s Book.
Thanks once again

 

[Doctor Leo]

You got me right, papertrading is cool when forward testing a strategy or learning to obey your own rules. But only in case you do have some. Otherwise it's just a waste of time. Or maybe we're talking about different matters?
You're not wrong in starting off with extensive use of indicators — these are the most frequently mentioned and wide spread tools and no wonder you've been impressed with all the examples. By themselves indicators are not bad (and not good either), they are just integral or differential derivatives of the price, and if used properly, they just help estimating some values. So it depends solely on the trader if they would be useful or not.
I'm glad to hear that you're trying to understand the intentions of people behind the price. Remember also that fx is by far the least emotional market in the world.
I can give you a hint where to start looking into. You — and most people — know that if trading according to book examples one will inevitably loose. So, why not start thinking contradictory?
And of course, a demo is a must before trading real money, and don't let yourself get convinced that you're a success before you're getting stable results for at least 6 months in a row.

 

[Doctor Leo]

It's fun to see that the only flag (in members' profiles) that is missing is that of my country

 

[hwsteele]

Doctor Leo,
Sorry, that's just not right so...

Have a great day!:cheesy:

 

[BSD]

Doctor Leo,
Sorry, that's just not right so...

Have a great day!:cheesy:

Lovely !

Somebody really needs to supply the good doctor with his flag methinks.

 

[Doctor Leo]

Thanks, hwsteele! BTW this picture has been shot in my home city

 

[hwsteele]

Wow what a happy surprise! Now you have your the flag and the girl. I'm jealous:cheesy: