Trading Forex with Double Bollinger Band, MACD, Stochastic Crossover Forex Strategy

Home / Trading Forex with Double Bollinger Band, MACD, Stochastic Crossover Forex Strategy

If you want to actively engage in forex trade, it is very essential that you learn about the market trend and how to determine if the trend exists at any particular time or the other.

This forex trading strategy is structured to help every trader know how to take a better forex decision and trade the market successfully.  To trade with this strategy, we will make use of three different technical indicators. However, these forex indicators are traded jointly in a special manner. These indicators includes the:

  • Bollinger Bands
  • Stochastic
  • MACD.

To trade with this strategy, we trade the forex in a manner that every one of them would make the confirmation of the trade signal from the other indicators and thus largely increasing favorable possibilities.

Sure, as a usual standard, we can incorporate support and resistance to additionally boost the trading system. To trade with this forex strategy, the parameters utilized for the indicators include the following:

  • Stochastic stages: 5, 5, 3
  • MACD stages: 12, 26, 9
  • Double Bollinger Band  with two of them having period 20

While one Bollinger Band (BB) deviation is 2, the other one deviates by 1.  From what we have illustrated in the chart below, the Bollinger band that is colored black is representing BB that has the standard deviation value of 2 whereas the Bollinger Band that is blue BB in color is the one with the standard deviation of 1.

If your native trading platform does not come with the option to incorporate a double Bollinger Band in the trading platform, you can incorporate two Bollinger bands with one having the standard deviation of 2 and the other the standard deviation of 1.

 

The rules for entering the market through this strategy

  1. The Price most breach and trade within the upper bands (in an uptrend) or within the lower bands in a downward direction.
  2. The stochastic indicator ought to be positioned in an equivalent direction with the trend as the Bollinger Bands. Thus, it ought to be bullish when the Bollinger band exhibits a bullish signal. If possible, the crossover on the stochastic should happen from oversold or overbought positions.
  3. The last verification is done with the MACD which must as well exhibit equivalent signal if Bollinger bands and Stochastic are bullish; the MACD indicator ought to as well exhibit a bullish crossover.
  4. An “equivalent time crossover” on the whole three indicators produces a higher likelihood for a successful trade and your preference should be to make the majorities of your entries under these situations.

It’s as well sensible to swap and view the lower timeframes to help you identify a more accurate entry point before initiating the entry. Frequently, Price Action patterns that are located on lower timeframes provide a better chance for success.

In the example illustrated with the USDCAD below, an equivalent time crossover was a signal that initiated a good uptrend that resulted to nearly 200 pips while trading forex with this strategy.

An illustration of equivalent time cross on the whole three indicators.

An illustration of equivalent time cross on the whole three indicators.

 

Where to place Stop-Loss

  1. The first stop loss should be positioned after the band with a deviation of 1 within the Bollinger band. Thus, under the band in an uptrend and on top of the band in a downward movement.
  2. It’s acceptable if price cuts across the interior band but it must close before it.
  3. You should only close trade when price closes beyond the bands.​It is essential to mention here that a few trading platforms don’t come with an option that allows you to put a stop on a close. You may need to get insight from an expert Advisor in a situation like this.
  4. In this example we have illustrated with USDJPY, the Stochastic and the MACD began to spin prior to the time the price closes beyond the band. This occurs often and assists to verify that the trend is about to finish.

An illustration of a short entry and exit on USDJPY four-hour chart

An illustration of a short entry and exit on USDJPY four-hour chart

 

 

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