Detailed presentation of the trading strategy based on Bollinger Bands
Objectives:
1. Identify the market situation: Range or Trend.
2. Apply the rules for opening trades according to market conditions.
3. Ensure proper risk management with variable SL and TP.
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1. Market identification
a. Range:
- Definition: Bollinger bands are nearly horizontal.
- Key indicators:
o The calculated average line for a band (upper/lower) has an angle of less than 25° to the horizontal.
o Number of candles analyzed - 20
o There are at least two distinct peaks touching or approaching the same outer bands.
b. Trend:
- Definition: Bollinger bands are relatively parallel and sloping.
- Key Indicators:
o The mean line has an angle greater than 30° to the horizontal.
o Number of candles analyzed - 20
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2. Conditions for opening transactions
a. Range:
- Direction: Trade against the chart direction.
- Signal:
o One candle near the outside band followed by one or two candles in the opposite direction.
o The sum of the bodies (Open-Close) of one or two consecutive candles in the opposite direction must be greater than the body of the candle that approached the outside lane.
b. Trend:
- Direction: Trading in the direction of the trend.
- Signal:
o The chart touches the Bollinger median band.
o The "reversal" criterion defined above applies.
c. Situation
- Conditions:
o A 1M candle pierces the lower band.
o The candle is longer than the previous candle.
o The volume has increased at least 20% since the previous one.
o Momentum is less than the average of the last 20 candles.
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3. Time interval filtering
- 1M: The distance between the outer bands must be at least 100 (equivalent to 1000 pips).
- 5M: The distance between the outer bands must be at least 150 (equivalent to 1500 pips).
- 15M: If there are no relevant spins on 1M and 5M, move to this range.
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4. Trade management
- Stop Loss (SL): Fixed at 400 pips.
- Take Profit (TP): Variable; the trade is closed when a return occurs according to the criteria defined above.
- Broker commission: A fixed commission of 280 pips per trade is considered.
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