Skip to content Skip to sidebar Skip to footer

Simple and Effective Forex Trading Strategy with Bollinger Bands and RSI

Master the Forex trading strategy with a high success rate using Bollinger Bands and RSI! This beginner-friendly guide explains how to set up indicators and identify entry points for long and short trades based on price movements and overbought/oversold conditions.

Tired of complicated trading strategies? This method offers a direct approach to analyzing the market and making informed decisions. Learn how to harness the power of Bollinger Bands for support and resistance, as well as use RSI to gauge overbought and oversold zones.

Setting up the RSI indicator with certain parameters

This method's first step is setting up the Bollinger Band indicator. This indicator is a great way to find support and resistance levels. If you have, then you should change it for this strategy. The first thing is to go to the long section and change this value to 30, ensuring the default division is set to 2. For more details please see the image below.

Bollinger Band Settings

How Bollinger Band Indicator Works

Bollinger band centerline

The middle line is part of the moving averages. So no matter how long, this indicator will return to many candlesticks and find the average among them. So for this method, We will return 30 candlesticks. Then for the lower and upper lines is the standard deviation line.

Next, add the RSI indicator. To do this, you can go to the indicator tab, type RSI and then add it. If you've already added an RSI indicator, let's change it a bit for the settings. The upper band paste is set to 70, and for the lower band, it is set to 30. Then for the length of 14, but for this strategy be sure to change it to 13. For more details, please see the image below.

RSI indicator settings

The RSI indicator is a great indicator to let you know if a particular security is overbought or oversold. If the line is above the value of 70, it means overbought. Then if the line is below the indigo of 30, it means oversold. You need to know, that in using these 2 indicators there are 2 different strategies that you can choose from when using this indicator.

Both strategies are built around a concept called average return. What does return mean? This return refers to the word average, and the word reversion means a return to so simply, the phrase mean reversion means a return to the mean. That's exactly what you're going to shoot with this method. 

For example, in most cases, if there is an extreme price rush in one direction whether it is up or down, we can predict that after that big price movement, the price will return to its average. So, if the price is above the upper Bollinger Band, we want to enter a short trade. But if the price is below the Bollinger Band indicator below, We can enter a long trade.

But if you do this yourself, most likely it will not work out well. That is why in this method We re-enhance one RSI indicator.

As you can see from the picture above, we see the price moving above or below the Bollinger band indicator many times and giving a lot of false signals. So if you come in every time you come here, here maybe you will lose a lot of money. To address something like this, we'll add one more requirement.

We can only enter when the RSI indicator reaches extreme values. That is, We can only enter long trades if a price moves below the lower Bollinger Band and the RSI Indicator is below the value of 25. To go short, we will only enter a trade if the price is above the upper Bollinger Band, and the RSI goes beyond the 75 indigo.

Post a Comment for "Simple and Effective Forex Trading Strategy with Bollinger Bands and RSI"