Many great investors in the world say that complicated things in trading make it easier for you to lose money. So do simple things help traders make money? We come to a very simple middle Bollinger Band trading strategy that any novice can do. Then judge for yourself whether the simplicity of Forex trading strategies can make money or not.
Register IQ Option and Get Free $10,000 Risk warning: Your capital might be at risk.
What is the Middle Bollinger Band trading strategy?
Bollinger Bands is a powerful technical indicator that measures market volatility and is used by many traders around the world. This indicator consists of 3 lines, the upper, the middle, and the lower band. In this strategy, the middle line of the Bollinger Bands indicator is used to provide an entry signal when a candle touches it (or touches and closes).
Here is how Bollinger Bands work.
- When Bollinger Band is up, only looking for opportunities to enter buy orders
- When Bollinger Band is down, only looking for opportunities to enter sell orders
How to set up the Bollinger Bands indicator when trading with this strategy is as follows.
Middle Bollinger Band trading strategy
Here are the conditions for you to enter a BUY order in an uptrend.
- In the uptrend, the Bollinger Bands will also be pointing up.
- You will wait until the price drops and touches the middle band
- Place a BUY order now or wait until the candle that touches the middle band closes and then place a pending buy order.
Here are the conditions for you to enter a SELL order in a downtrend
- In the downtrend, the Bollinger Bands will also point down.
- You will wait until the price rises and touches the middle Bollinger Band.
- Place a SELL order now or wait until the candle that touches the middle band closes and then place a pending sell order.
How to set stop loss and take profit with this strategy
If you place a pending buy order, the best stop loss should be placed at the lower band, right at the close of the candle. If the gap is too far then move the stop loss to the previous nearest low.
If you place a buy order right after the price touches the middle band, you can place a stop loss at least 5-10 pips below the opening candle.
Similarly, you can set a stop loss when placing a pending sell order as follows.
Place stop loss at the upper band
Or place a stop loss 5-15 pips above the top of the opening candle.
To have the best profit-taking plan, you can refer to the following ways.
If it is a buy order, take profits as soon as the candle touches the upper band
If it is a sell order, take profits as soon as the candle touches the lower band
Or you can use the trailing stop technique with profitable sell orders by moving the stop loss to the top of each candle that has just closed until exit.
Similarly, you can do it with profitable buy orders by moving the stop loss to the bottom of each candle that has just closed until exit.
Summary
This is an extremely simple strategy, suitable for traders who are new to the market. I would like to summarize some advantages and notes when trading with the middle Bollinger Band.
- If you are a scalping trader and prefer to trade on shorter timeframes, you can use this strategy to trade on 1-minute to 5-minute frames.
- This is also a good Swing trading strategy on the H4 timeframes or the daily chart
- You should avoid trading when the band is narrow because there can be a lot of signal noise
- You can use a reversal candlestick pattern to confirm the entry signal
Above, I have just introduced a very simple strategy to use the middle Bollinger Band. Experience it yourself and see how effective it is on a Demo account before trading for real.
Register IQ Option and Get Free $10,000 Risk warning: Your capital might be at risk.