
Jump in to learn the simple and effective trading strategy, which is based on classic forex principles. No indicators will be needed!
2021-02-12 • Updated
We all know how you love scalping, right? This trading approach helps you to take advantage out of trading on small (less than 1 hour) timeframes. In this article, we will introduce you to another scalping strategy that requires the usage of the Bollinger Bands indicator.
Timeframe: M5
Currency pairs: GBP/USD, EUR/USD
Indicators: Bollinger Bands with the following settings: a period of 20, 2 standard deviations; Stochastic Oscillator with standard settings (14, 5, 3) as a filter.
The whole strategy is based on finding a flat Bollinger band. That means, we are looking for a flat market situation, where the price does not make new highs or lows. It is recommended to trade this strategy during the early morning hours or at night when Europe is still asleep and volatility is low. The trading algorithm is very simple. You just need to follow the steps explained below.
Let’s consider an example of GBP/USD. The pair was trading sideways on January 12, between 00:00-07:15 MT time. When the price touched the lower Bollinger band, we looked at the Stochastic Oscillator. At that time, it entered the oversold zone. We opened a long position at 1.3507. We placed a Stop Loss 10 pips below the entry at 1.3497. Take Profit was located at the upper Bollinger band at 1.3527. We successfully earned 20 pips!
An algorithm for sellers is exactly opposite.
As an example of this strategy, we will look once again at the M5 chart of GBP/USD. On January 14, somewhere between 23:00 and 05:00 MT time the cable was consolidating. We waited when the price touched the upper Bollinger band and the Stochastic Oscillator reached an overbought zone. We opened a short position at 1.3695. This time, we tried another calculation of stop loss. Firstly, we calculated the distance between our entry and the middle Bollinger band (1.3695-1.3688=0.0007). Therefore, our Stop Loss goes 7 pips above the entry level (1.3702). Take Profit goes at 1.3680 (where the price touches the lower Bollinger band). As a result, we earned 15 pips.
Conclusion
The strategy we explained above has several main advantages for you. First of all, it is very easy to implement and it requires only two oscillators. Secondly, it allows you to trade during "sleepy markets" when the volatility is low and you don't know what to do. Finally, it’s scalping, beloved by literally everyone! So, why not give it a try?
Jump in to learn the simple and effective trading strategy, which is based on classic forex principles. No indicators will be needed!
What do we do when the price enters uncharted territory with no previous lows or highs to serve as support and resistance levels? Here is your guide into the unknown.
In this article, we will discuss what the shooting star pattern is, how to recognize it, and how you can use it in your trading. Let’s get started!
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