We are going to use three popular technical indicators to trade this system:
However, we are going to use them in a special kind of way. Essentially in a way where each of them confirms the signal from the other indicators and therefore hugely stacking the probabilities in our favor.
Of course, as always we can add support and resistance to further enhance the system.
Specifically for this strategy, the parameters used for the indicators are as follows:
The deviation of one Bollinger Band (BB) is 2 while for the other is 1. In our examples here on the charts, the black BB is with the standard deviation of 2 while the blue BB is with the standard deviation of 1.
If there is no native option to add a double Bollinger Band in your trading platform you can always add 2 BBs where one is with a standard deviation of 1 and the other is with a deviation of 2.
It’s also wise that before triggering the entry you switch and look at the lower timeframes to try and pinpoint a better entry price. Often times Price Action patterns on lower timeframes will give a chance for a better entry.
In the following example on USDCAD, a same time crossover signaled the start of a nice uptrend that yielded almost 200 pips with this strategy.
In this USDJPY example, the Stochastic and the MACD started to turn before the price closed outside of the band. This is a common occurrence and helps to confirm that the trend is near exhaustion.
Managing the Opened Trade, Trailing the Stop-Loss:
For example, if it appears at a support or resistance level then it should be looked at carefully as a reversal is much more likely. On the other hand, if there is no support, resistance or other obstacles then it can be false and not much significant. The ongoing trend will probably continue.
Related education and FX know-how:
Forex Education - Basics:
Forex Education - FX Brokers:
Forex Education - Technical Analysis: