This method involves holding positions for just a few seconds or minutes, at the most. The Bollinger Bands, measuring volatility, is a great indicator for taking small portions of profit from the market. A solid scalping trading technique which includes the Bollinger bands must use other indicators to pinpoint our market entries. I use a moving average for trend determination and the Stochastic indicator for market entries.
We want to search for low volatility periods, in the direction of the short-term market trend, to position ourselves for scalping a few points. Basically, we are trading with EMA on the 5-min charts If the price trades above the exponential moving average, we consider taking only BUY signals. We have a Dow Jones 1-min chart with the indicators plotted on it.
As the price trades below the period exponential moving average, we start looking for short positions only. Once we know we are interested in short entries, we are looking for the price to trade near the upper Bollinger Band. We also prefer the Bollinger Bands to be flat, or parallel.
However, this is not a deal-breaker. If the momentum drives the price near or outside the upper Bollinger band, we could take this trade also. When the price reaches this area, we look at the Stochastic Oscillator to enter the market. Ideally, we want the Stochastic to be in an overbought area. If not, a divergence on the Stochastic would be also a great confirmation. As you can see, this setup generated 4 valid short positions.
As you can see, we are in a minor uptrend, but the market mainly trades sideways. This time, the signals were more obvious. We had 5 valid long opportunities, all of them being successful. As you can see, we also had some divergences on the Stochastic oscillator.
Divergences acted as a catalyst for the price to reject the Bollinger Bands. The main advantage of this scalping setup with the Bollinger bands is that you can use in all market conditions. You CAN trade this system during range markets. This is not a trend-only system. In day trading, Bollinger Bands indicator works well with other oscillators indicating overbought or oversold areas.
One of them is the commodity channel index CCI. This setup involves a crossover between the CCI and a moving average, based on the price action around the Bollinger Bands. In order to smooth the signals offered by the Commodity Channel Index indicator, I prefer to add a moving average on the indicator. Now, a crossover between the CCI oscillator and a moving average will catch good movements when markets are trending.
When markets are trading in a range, this system is subject to whipsaws, which will lead to losing trades. Here are the main guidelines that you should follow: We trade this day trading setup on the M15 chart Plot the Bollinger bands with a period moving average and a standard deviation of 3 Plot the period Commodity Channel Index CCI indicator.
We use a higher number of periods on the CCI in order to smooth the indicator. We want fewer signals, but quality ones. Add a period exponential moving average on the CCI, not on the price chart. We aim to trade the crossover between the CCI and the moving average. We mainly look at the crossover between the CCI and the exponential moving average and at the time the crossover happens.
Ideally, we want a buy crossover above the 0 level and a sell crossover below the 0 level. But markets are not perfect, so we must adapt to current conditions. The first signal occurred was a sell signal. The crossover was generated right on the 0-level and the price traded below the middle Bollinger Band. This was a valid short entry. The second signal was a buy signal, but the crossover happened below the 0-level.
Entering at this point is a riskier trade. A conservative buy opportunity would be to wait for the CCI to cross above the 0-level. The third signal was a short opportunity. As the crossover occurred slightly above the 0 level, we waited for a few candles for the CCI to drop below the 0 level The 4 signal was a no trade.
The buy crossover happened below the 0 level and below the middle Bollinger Band. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you.
In addition, the indicators, strategies, columns, articles and all other features of Companys products collectively, the Information are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Companys website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment.
Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading and may not be impacted by brokerage and other slippage fees.
Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.
Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this website or any product purchased from this website is for educational purposes only and is not intended to provide financial advice.
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