Bollinger bands should be used with parameters 12 and 2 (12 periods and standard deviation 2), MACD with standard parameters 26, 12 and 9 (fast EMA 12, slower EMA 26 and signal line 9). Use these settings to get the best results when trading. But, what other things should be considered when trading on the Forex?
It goes without saying that a long or short entry is only useful in conjunction with the chart. Blindly trusting the indicators is not advisable. Rather, the signals from the indicators should underpin the expected course direction according to the chart.
A long signal appears in the chart as soon as the trigger touches the upper Bollinger band, a short signal is produced as soon as it touches the lower, downward Bollinger band. In this case, it must be assumed that the trend is establishing itself in a certain direction.
Use the strategy
This strategy is suitable for short-term periods and can, therefore, be applied in the one, five, 10-, and 15-minute charts. The complete initial setup is as follows.
- For a long signal, the course must touch the upper Bollinger band, which is pointing upwards (the steeper, the better).
- The fast EMA 12 cuts the slow EMA 26 from the bottom up.
- For a short signal, the course must touch the lower Bollinger band, which is directed downwards, and the fast EMA 12 cuts the slow EMA 26 from top to bottom.
- As soon as the entry conditions are all met, the entry is started.
Since this system is a very short-term trading approach, the exit should be made as soon as initial indications of a trend reversal are shown. If the Bollinger tapes change direction, it is assumed that the trend is now complete and the position should be closed. Practice and test this strategy by simply opening a demo account at a broker of your choice.
Precisely because the indicators used are available in any standard chart, this trading strategy is relatively easy to implement. This strategy is to be recommended for markets in which the investors are, according to experience, using a technical point of view. To learn more about Markus Heitkoetter, click here.