OUR “NUMBER 1” 5-10 MINUTE STRATEGY
High-Low – Australian
24Option – International
Stock Pair – International
Download MetaTrader 4, install software and set up template as follows. Set up charts using template, start with 6 or 12 currency pairs if you are intermediate trader.
Bollinger Bands and RSI Trading strategy (5-10 minutes)
In order to know how we should trade with any indicator, we have to understand what this indicator means and how to use it to our advantage.
We will start with Bollinger bands:
The Bollinger Bands are built of 3 lines:
1. The middle line is the Moving Average (or MA) of period 20, meaning that we see the average of the last 20 candles. We will usually use it for defining the trend in the market. The base rule for the moving average is: If the current price is above the MA then we are looking at an uptrend and if the price is below the MA, then this is a downtrend.
2. Upper and lower bands- those are the Bollinger Bands (or just Bollinger). the Bollinger Bands are built in a way that 95% of the time the price will stay between the bands while 5% of the time it will be outside the bands. We are talking about 2 standard deviations of the price movement, of the last 20 candles.
We can use this tool when we see that the price is moving above the upper or under the lower Bollinger Bands, in this case we know that it is not supposed to be there for a long time so we will look for a trade on the opposite direction.
But the Bollinger Bands are NOT reliable enough on their own. Therefore, we will add the RSI indicator in order to increase the reliability.
So, what is RSI Indicator?
RSI is the little graph under the main chart and its purpose is to show when the price reaches extreme levels of overbuying or overselling the currency pair or asset.
Once we see that the price is reaching those levels, it indicates that it should go back in the opposite direction very soon.
So what is the strategy?
We will combine those two indicators and find the best entry point based on their combination, in order to do so, we will look for 3 indications before opening our trade.
1. Breaking of the Bollinger Band (upper or lower)
2. RSI reaching or breaking the 70 or 30 levels.
3. Once we have seen both, first indications are shown on the chart, we will start looking for a trade, but we will take it only when we will see a real intention of the price to go back in the opposite direction, meaning that we will have to see a bounce back candle that opens outside the Bollinger Bands and closes inside the Bollinger Bands. Once this candle closes inside the Bollinger Bands, we will immediately take a trade in the same direction of this candle.
The last thing we want to make sure, to take this trade for a minimum of 5 minutes! Actually, from out latest trial and experimentation this strategy actually works with a higher success rate when applying a 10 minute expiry. However, run your own tests and research to see which time frame suits you best.
Outcome of that trade:
Some more examples;
We are not expecting a win on every trade, there will be losses, but this strategy has proven itself and shows results of about 70% – 75% success
Good luck and if you would like to know more or let us know how this strategy worked out for you, then please Contact Us!