If you observe the chart closely, you will see that price that escapes the Bollinger bands boundaries often times tends to move in that direction for a prolonged period of time. Usually it also returns back into the tunnel at higher/ lower price level.
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This is a Bollinger bands tunnel based forex strategy, that is applying adding to the winner principle on the price breakout. Two liquidation methods were tested. Trailing stop and the opposite end of a tunnel. Trailing stop was performing substantially better.
Strategy aims to take the advantage of such a movement aggressively adding to the winner. Expert advisor is provided freely in order for your to test this strategy on historical data and find the best possible setting (because there are thousands of them).
Used forex tools and indicators
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Bollinger bands forex indicator. (Period 50, deviation 2) We will be looking for price closing either above or below the tunnel boundaries. The candle has to have a minimum size and the volume on that candle must be larger than a volume on previous candle.
Trailing stop: Trailed behind every closed candle + additional distance of 100 pips.
Adding to the winner principle: The floating profit must be positive to open the next trade (if trade exists). The profit of previous position must be covered by trailing stop.
Forex strategy rules
Price break bottom bollinger band. Closing below it with specific candle size (10 - 100 pips). We enter the trade short on candle with volume larger than previous candle volume.
Trailing stop is placed above the candle high + additional distance 100 pips. It will be trailed above high of each following closed candle (if it is lower than its previous position).
While trade exists, new trade can only be opened if the position is in profit and current price is below trailing stop. The new position must also meet all the requirements for initial entry.
Exit only on trailing stop.
Price breaks above upper bollinger band. Closing above it with specific candle size (10 - 100 pips).. We enter the trade long on candle with volume larger than previous candle volume.
Trailing stop is placed below the candle low - additional distance of 100 pips. It will be trailed below the low of each following closed candle (if it is higher than its previous position).
While trade exists, new trade can only be opened if the position is in profit and current price is above trailing stop. The new position must also meet all the requirements for initial entry.
Exit only on trailing stop.
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Disclaimer: Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.