Double Bollinger Bands Strategy

[erebus]

Hello all,

I found this strategy on another forum and it seems to me that it works great for swing trading on 4 hour chart.

You can Google for that name or I will mention the other forum if Dale approves.

This is how to setup the charts.

Add 2 sets of Bollinger Bands:

Use the default settings for the first Bollinger Bands:

Period: 20
Deviations: 2
Shift: 0

The deviations of the second BB indicator, has to be set to 1:

Period: 20
Deviations: 1
Shift: 0

Or to make it easy with Metatrader users, here is the DBB Alert indicator, it looks like this on a chart. It prints an arrow when the trade entry specifics mentioned below are made.

Here is how the trade setups form based on the Double Bollinger Bands Trading Strategy:

Long Trade Setups:

To go long (to buy), you have to wait for one of the candlesticks to close above the BB deviation 1 upper band. Then you should check the previous two candlesticks to see whether their close prices are below the BB deviation 1 upper band or not. If so, you have a long trade setup (buy signal), and you can go long (buy) at close of the candlestick which has broken below the BB deviation 1 upper band.

Short Trade Setups:

To go short (to sell), you have to wait for one of the candlesticks to close below the BB deviation 1 lower band. Then you should check the previous two candlesticks to see whether their close prices are above the BB deviation 1 lower band or not. If so, you have a short trade setup (sell signal), and you can go short (sell) at close of the candlestick which has broken below the BB deviation 1 lower band.

 

[erebus]

On the posted chart, you will see there are 2 sell signals, the second would be a loss.

However, I found another indicator that filters that signal out and also makes the entries and stops very easy to locate.

It is the Bollinger Bands Stop v2 and added to that chart, looks like this.

 

[erebus]

Now stop loss placement is a personal thing, and you can experiment or back test this all you want; just don't nag me about it (I have a wife for that)

What I do is, use the opposite BB deviation 1, and put it there, easy, if price gets back there, you are wrong, market changed, news, whatever!

Set up the Fibo tool to guide you with this. Also, entry will never be exact, don't sweat it, use a zone, or watch for retracement, depends on time of day too.

Obviously, in this example, placing the stop loss at recent candle low or 50% will greatly increase your Reward to Risk Ratio, but as I said, this is your preference and what your back testing will tell you.

 

[erebus]

And for BattleStation aficionados, there was a Bullish Bar signal right there also, after an Inside Bar; and Engulfing bar for those with extra confirmation required

So you can use this with existing 4 hour analysis and candle patterns / signals.

Okay, that's all for now, I will post any signals I see for the next week or two, and re-evaluate from there.

 

[erebus]

No questions, comments yet? Well, it is Sunday I guess, so I'll carry on as my personal trading guide for the coming week(s)

One thing I probably didn't state clearly enough, the 'official' trade entry signal is the CLOSE of the first candle beyond the Bollinger Band

In this example, you can see that a candle close above the BB and therefore the signal entry cannot be the red line on the BB itself.

Another thing I will be watching is Pivot Points, Weekly on the 4 Hour and Daily on the 1 Hour

Here price has dropped early in the week and now recovered to close near the WPP, and notice the entry zone I make allowance for.

This price action was at New York open, when I am in bed usually, but the 1 Hour chart shows an example of retracement to watch for

Very often during the Asian session, price will retreat as everyone has moved their stops up to protect profits

So this is a good thing, 12 hours after the signal, we are still able to get a great entry at the Daily Pivot and BRN 124 is a bonus!

Personally, I would have no problem buying this market dropping to Daily PP in Asian session; how about you?

This is at 1 to 1 Risk Reward, so be interesting to see what happens on Monday opens!

 

[erebus]

Still early Asian session Monday on March 7, 2016. A possible trade entry on the CAD-CHF, about 60 pips stop loss, might be tempted to see what happens

 

[erebus]

Again, still early Asian session, the only other setup that I can find near an entry line. EUR-CAD had a great run down, NFP made some wild swings on 4H candles, maybe time for retracement up?

 

[erebus]

Update on Monday: entered CAD-CHF, had insomnia, scared myself out of trade at 0.5% and that is where price is now. There were some wild swings so I think a good thing to protect account.

 

[Muhammad Ishaq]

Great information

 

[erebus]

Great information

Thanks, and here is one that I missed, even gave 2 arrows, probably go all the way now

 

[Andy]

This is awesome Erebus! Appreciate your selfless devotion to help us.

 

[exterior]

Did I miss something? What is the BB with Deviation-2 used for?

 

[erebus]

Did I miss something? What is the BB with Deviation-2 used for?

I was wondering that myself, so I have no idea, just to use as regular BB to observe / gauge the price action to see if it gets over extended.

Now, I've been quiet all week due to the volatility as I'm sure you have all seen on your charts.

I will post some charts later, but I would like to say I have changed my view on the 4 hour charts.

I think they are an excellent way to gauge what is happening on the 15 M chart and I'll be posting about that also.

 

[tjenarvi]

My first time heard this strategy was posted by nick name Kang Gun in forexindo.com, he is Indonesian posted a lot about this, and I read his postings a lot back in 2009 ago.

• Basically it's statistical idea that if price past upper BB SD1, that would means trending UP, if price past below BB SD2, that would means trending DOWN.

• If price within upper and lower BB SD1, that would means price statistically is in RANGE. To emphasize this, if price coming from OUTSIDE upper and lower BB SD1 and then enters between upper and lower BB SD1, that would means price statistically changed from trending up/down to in RANGE.
• With this simple statistic idea, you then cam build your own strategy.

Don't forget also the basic strategy of BB when it's forming FLAT. This is the very first time explanation by Kang Gun, before explaining the SD1 statistic idea above:

• When the BB is flat, it's the best statistically easier to predict of price direction, and at first Kang Gun only loves to trade when the BB is flat.
• When the BB is flat, and touch the UPPER SD2 or even UPPER SD3, it's statistically only to the maximum SD3 anyway, the price will go in range and then try to reach the LOWER SD2. Of course it applies vice versa.
• With this simple idea, you then can build your own strategy.

After these 2 things about how to trade statistically, Kang Gun then wrote too much another statistical idea stuffs with another strategy and made people confuse and not consistent with his own strategy at all.

So then I forget this idea and put it safely in the my memory as an archive, and I now only trade pure price without indicator at all.

 

[erebus]

Here is a set up on CAD-JPY that also has Price Action of breaking down from a Rising Wedge; I'll watch for minor retrace as I have other positions open already

 

[RF1508]

Hi Erebus,

I do use this system for about 7 months now in addition to other systems.
And off course completed by the knowledge Dale thought us.

It's quite a profitable system (and able to catch trends from the beginning) but works even better if:
* The two candles preceding the signal candle close between the BB middle band and the BB deviation 1.
* Stochastics momentum is >50 for longs or <50 for shorts.

I only use it on the daily as you can clearly see how the H4 has quite some false signals (depending on the pair). When trading the DAX I use the on the H1 because the daily can be very choppy.

 

[pippo]

Hi Erebus, would you mind please explain how to use "Bollinger Bands Stop v2"? Thanks a lot.

 

[erebus]

Hi Erebus, would you mind please explain how to use "Bollinger Bands Stop v2"? Thanks a lot.

Basically, enter when the indicator shows that price has changed direction, much the same as PSAR or SuperTrend or Donchian Channels.

Read more here http://www.luckscout.com/double-bollinger-bands-strategy-to-trade-forex/

 

[hung]

thanks Erebus.

 

[pmull]

E are you still using this? I've always used bands and heard about this but never actually heard from someone directly that this works? might have to try this out next week, looks easy enough to back test