How do I create a trading strategy with Bollinger Bands® and the MACD?
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Day traders make trading way too complicated! They plot dozens of indicators on their trading screen and then fail to enter trades with confidence. In this article you will learn how to have confidence in your trading decisions by using a simple day trading strategy that only relies on two indicators. This strategy is a simple trend following strategy that should work in any market, but as a day trader I prefer to trade futures. This means that a bar or a candle is plotted every 4, trades.
All that counts is the amount of trades that have been executed in the market. The advantage of a simple day trading strategy using bollinger and macd tick charts is that the number of bars will increase and decrease depending on volatility.
When the markets are moving and there are more trades, you will have more bars. If the markets are quiet you will have fewer bars. However, in the first two hours of active trading between 9: Tick charts remove the time factor from charts and add volume and volatility to your bars.
We update tick settings for the markets we follow times per year, since volatility in the markets can change. Just use the standard settings: The market is in an uptrend if the MACD is above its signal line and above a simple day trading strategy using bollinger and macd zero line. The market is in a downtrend if the MACD is a simple day trading strategy using bollinger and macd its signal line and below the zero line.
My charting software allows me to color the bars based on certain criteria, and therefore I am coloring the bars in an uptrend according to the definition above green and the bars in a downtrend red. To avoid being whipsawed in a sideways market and to only catch strong trends, we are adding a second indicator: We are using the following settings: Entry Signals We use the Bollinger Bands to determine our entry signal: If you are not filled, adjust your stop order to reflect the Upper Bollinger Band value as long as we remain in an uptrend.
If you are not filled, adjust your stop order to reflect the Lower Bollinger Band as long as we remain in a downtrend. By using stop orders we will only be triggered if price pushes through the Bollinger Band, which can signal a continuation of the trend.
Our goal is to accommodate different market conditions by using wider stops and profit targets a simple day trading strategy using bollinger and macd a volatile market, while using smaller stops and profit targets in a quiet market. A simple day trading strategy using bollinger and macd order to calculate the ADR, we measure the distance between the Daily High and the Daily Lowand build an average over the past seven days: We use this ADR to calculate our stop loss and profit target: I highly recommend using a profit target to take profits and get out of a trade before it turns against you.
In addition to our profit target and stop loss, we will close a trade if a bar completes and we see a MACD crossover. If we are long and MACD crosses back below the signal line, or short and MACD crosses back above the signal line, we want to close the trade to get out of a position in case the trend reverses. Test it out and you will be surprised at how robust it is. Once you are familiar with the basic rules, consider incorporating your personal trading preferences like scaling in and out of a position, using trailing stops or any additional filters that you are comfortable with.
All the best in your trading. At Connors Research, we are using it as an overlay to many of our best strategies to make them even better -- now you can, too. The Connors Group, Inc.