1-2-3 PATTERN Double Bollinger Bands Trading Strategy

The Double Bollinger Band Strategy makes use of two Bollinger Bands in order to filter entries and exits in the market. The strategy aims to enter long or short trades when price breaks above or below 0.5 deviation. The strategy can be applied to ranging markets, as a breakout strategy or when assessing the momentum or slowdown of an existing trend.

 

The Double Bollinger Band strategy incorporates three different zones.

1. Double Bollinger Band or DBB Buy Zone. The DBB Buy Zone is found above the upper 0.5 standard deviation. Presents a buy signal.
2. DBB Neutral Zone or 20 SMA Zone. This is the center area between the upper and lower, 0.5 standard deviation. Price trading in this area could be indicative of a choppy market that lacks a directional bias. Trend traders are to avoid taking new positions in this zone. Signals a slow- down in momentum or the beginning of a ranging market.
3. DBB Sell Zone: This zone is found below the 20 SMA zone. Presents a sell signal.

 

• Download “ForexWOT-123patternBollingerBands” (Zip/RAR File).
• Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
• Copy the “ForexWOT-123patternBollingerBands.tpl” file (template) to your Metatrader Directory …/templates /
• Start or restart your Metatrader Client.
• Select Chart and Timeframe where you want to test your forex system.
• Right-click on your trading chart and hover on “Template”.
• Move right to select “ForexWOT-123patternBollingerBands” trading system and strategy.
• You will see the “ForexWOT-123patternBollingerBands” is available on your Chart.

 

Because the 1-2-3 pattern occurs in virtually every market and any time frame, this strategy can be applied to trade in a variety of instruments and time frames, including short, medium and long term.

It works well in any time interval and market that is dynamic enough to swing from side to side while on trend, or to swing with enough volatility within a price range to generate good opportunities.

 

In a market downtrend, the price must reach or exceed the upper Bollinger Band, or the price must meet or exceed the center line before the 1-2-3 formation to become a legitimate pattern from which you can enter the market according to the classic rules of this price formation.

 

In a market uptrend, the price must meet or exceed the lower Bollinger Band, or the price must meet or exceed the center line before the 1-2-3 formation to become a legitimate pattern from which you can enter the market according to the classic rules of this price pattern.

 

To close the positions you can apply the following criteria:

• Stop loss: For an uptrend, the stop loss is placed below the point 3 of the 1-2-3 pattern. For a downtrend, the stop loss should be placed above the point 3 of the pattern.
• Take Profit: Occasionally, from a 1-2-3 pattern may originate strong movements, so the trader can use traling stops to follow the price.

Another option is to place Take Profit objective in a significant support or resistance level. The trader can also wait a 1-2-3 pattern in the opposite direction of the position, although it must be remembered that these patterns might be the start of trends changes.