This is a versatile forex strategy that can be also used for scalping. It has build-in target calculation based on BB and thus market volatility. All positions are protected by tunnel based trailing stop. These features combined, were proven to bring profits with relatively low draw down, during our high quality historical data test (since 2003).
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Two indicators are used to confirm the breakout and its momentum Demarker and standard Bollinger bands tunnel. The BB tunnel line that was broker as part of a signal is used as trailing stop. Effectively catching price escapes. Bolliger bands with higher deviation are also used to calculate our profit target. This feature in particular enables us to use this forex strategy also as a scalper.
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Our tests were run on 1H EURUSD data since 2003. The forex strategy is provided free together with free expert advisor trading it.
Used tools and indicators
DeMarker (150). Central zone is drawn in the center of DeM indicator. High calculation period of 150 is used. We will be looking for DEM to trend outside of central (neutral) zone. The central zone will be considered an indication of ranging market unsuitable for our entry. Adjust the buy above/ sell below zone parameters to modify this zone.
Bollinger bands (period 60, deviation 2, target BB deviation 8 - omitted in test). This indicator is a key element in this forex strategy. It provides us with primary signal. Trailing stop placement and higher deviation BB are used also for profit target. You can manipulate both signal BB period/deviation and BB target deviation. Profit target was too wide to be triggered in test, however it is suitable to be used in lower time frames and especially in scalping situation.
Trailing stop loss (+30 pips): Trailing stop is used to protect any profits and is also used as a stop loss upon position entry. Additional distance can be applied to move it further from the current price.
Forex strategy rules
SELL
DEM trending below sell below line (0,5 in test).
BB tunnel bottom line is penetrated by candle closing below it (previous close was within tunnel). We enter the trade on signal(breakout) candle close. Trailing stop is place at the bottom BB (line that got broker + extra distance of 30 pips).
Profit target: Bottom BB line with same calculation period but wider deviation (Target BB deviation 8, not used in test).
Position is liquidated either by take profit or trailing stop, whatever comes first. We do not open more than one trade at the same time.
BUY
DEM trending above buy above line (0,5 in test).
BB tunnel upper line is penetrated by candle closing above it (previous close was within tunnel). We enter the trade on signal (breakout) candle close. Trailing stop is place at the upper BB (line that got broker - extra distance of 30 pips).
Profit target: Upper BB line with same calculation period but wider deviation (Target BB deviation 8 not used in test).
Position is liquidated either by take profit or trailing stop, whatever comes first. We do not open more than one trade at the same time.
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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.
