The Bollinger Bands and MACD reversal strategy is a classic yet highly effective basic trading approach. Its logic is straightforward: traders wait for specific conditions to align before making their moves.
Setup and Strategy Details
Timeframe: Suitable for 5 minutes or longer timeframes.
Currency Pairs: Works well with any pairs, but particularly effective with EUR/GBP, AUD/NZD, and AUD/CHF.
Trading Style: Applicable for both day trading and swing trading
Indicators
Bollinger Bands (25, 2.5)
Simple Moving Average (SMA) Periods: 9 (applied to the closing prices).
MACD (Moving Average Convergence Divergence):
Parameters: 7, 21, 9
Trading Rules
Buy Signal:
When the price touches or exceeds the lower Bollinger Band:
Wait for the price to be greater than the 9-period SMA.
Confirm the buy signal when the MACD crosses upwards.
Sell Signal:
When the price touches or exceeds the lower Bollinger Band:
Wait for the price to be greater than the 9-period SMA.
Confirm the sell signal when the MACD crosses upwards.
Risk Management:
Stop Loss: Set at the previous swing’s high or low.
Take Profit: Either at the middle Bollinger Band or with a risk-reward ratio of 1:1.15.
Remember to adapt this strategy to your risk tolerance and trading preferences. Happy trading!