Forex Bollinger Bands Price Action Trading System and Strategy

Bollinger Bands trading system is a price action forex strategy based on Zig Zag rnp indicator, advanced-ADX, ArrzzX2 indicator with Bollinger bands.

Bollinger Bands® are a technical chart indicator popular among traders across several financial markets. On a chart, Bollinger Bands® are two “bands” that sandwich the market price. Many traders use them primarily to determine overbought and oversold levels.

One common strategy is to sell when the price touches the upper Bollinger Band® and buy when it hits the lower Bollinger Band®. This technique generally works well in markets that bounce around in a consistent range, also called range-bound markets. In this type of market, the price bounces off the Bollinger Bands® like a ball bouncing between two walls.


Bollinger Bands Trading Rules


Bollinger Middle Band is nothing but a simple moving average. Bollinger Upper and Lower Bands measure deviations. I can bring their formula here, but it will not have any usage for your trading.

The only thing we should know is that they are so strong in locating the trends and reversals. Combining the candlesticks patterns with Bollinger Bands, creates a great trading system that shows the strongest continuation and reversal trade setups.


Buy Conditions:
  1. on the chart Zig Zag rnp 25 or Zig Zag rnp 50 breaks bollinger bands lower withe or royal blue;
  2. appears blue support of the ArrZZx2 indicator ;
  3. Advanced-ADX green and above 23 line
  4. Buy if stochastic V.3 MTF has crossed upward.


Sell Conditions:
  1. on the chart Zig Zag rnp 25 or Zig Zag rnp 50 breaks bollinger bands upper withe or royal blue;
  2. appears red resistance of the ArrZZx2 indicator ;
  3. Advanced-ADX red and below 23 line
  4. sell if stochastic V.3 MTF has crossed downward


Bollinger Bands Trend Trading

One of the most important features of Bollinger Bands is that when the market is slow and there is no reasonable volatility, the upper and lower bands become close to each other:

As you see on the above image, Bollinger upper and lower bands have become so close to each other in the area that I have placed those white arrows. Keep in your mind that when the market becomes slow like that, and it makes a narrow range, a breakout that can be the beginning of a big trend is on the way. You can easily predict the direction of the breakout with the signals that the market already has shown. Just follow the numbers at the above image and you will see what I mean.

The candlestick #1 has a long lower shadow. What does that mean? It means a big Bullish pressure is imposed to the market suddenly. So the price wants to go up. This is the first signal. You could take a long position after this candle, but if you did not, the market would show you some more signals to go long.

After candle #1, market becomes slow and Bollinger upper and lower bands become so close to each other. Candle #2 shows a breakout with the Bollinger lower band, but it is closed above it. This candle also has a long lower shadow that reflects the upward pressure. Then the market becomes slow for several candles, BUT candle #3 assures you that the range is broken. So if you didn’t have a long position, you could go long at the close of #3 candle. Then some red candles are appeared, but you should know that after a range breakout, the very first reversal signal is not indeed a reversal signal. It is a continuation signal.

The above breakout could be the beginning of a big trend, but it is not. I just brought it here as an example of ranging market and its breakout. If the candlesticks movements make you confused, you can shift to the line chart from time to time and find the real support and resistance of the range. Line chart is plotted based on the close signal. Close signal is the most important thing specially when you want to interpret the signals with Bollinger Bands and predict the market.

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