Bollinger Bands are a classic technical tool, on the basis of which it is possible to create simple and quite effective strategies. It is based on a formula similar to the moving average formula. This tool shows the current price deviation and is calculated based on the standard deviation from the MA. Principles of building strategies for Bollinger bands:
- rebound from the channel. The price that is inside the channel is reflected from its borders. If the rebound is confirmed (no correction), then a position is opened in the direction of the rebound;
- channel breakdown. If the price goes beyond the channel and is not a time correction, then this indicates the emergence of a strong trend.
Envelop is another channel indicator. He draws the channels within which the price lasts the longest. The boundaries of the channel are moving averages. In part, it repeats the Bollinger bands, but it has more settings: the offset parameters from the current price, the deviation from the central sliding. Most of the trading platforms have this indicator, but you can add it manually.
Bolibands and Envelop Trading Advisor
This Expert Advisor combines the strengths of both indicators. According to the results of the test period, the adviser showed a yield of 22.1% for 6 months with a drawdown of only 5.87% (an analysis of the backtest can be found at the broker AMarkets, which offers to download the adviser for free to all its customers). Interestingly, the feedback on the adviser is positive. And even if the drawdown sometimes reaches 15%, then this can be considered the norm.
Introduction to the Bollinger Bands and Develop Strategy:
- the period of the Bollinger Bands is 6, the shift is 0, the deviation is 2;
- Envelop period – 8, shift – 0, deviation – 0.1;
- Parabolic Sar pitch is 0.14-0.2.
The trading advisor has much more options, since they also include the automation of opening a position. Also in its structure there are risk management settings, but they are classic like most other robots.
The principle of opening a position is as follows: at the moment when the Bolibands lines are inside Envelop, a preliminary signal appears for opening a position. As soon as Bollinger bands go beyond Envelop, a position is opened. The direction indicates Parabolic Sar: if the indicator points are below the price line, a long position is opened. Recommended take profit – 90 points, stop loss – 10-20 points.
Recommendations for using the advisor:
- the filter of the flat will not be superfluous for the adviser;
- when testing an adviser on a demo account, follow his actions. If you see a signal on the chart to enter, but the adviser does not open the position, look for a problem in the settings of the robot. Probably the period parameters are set incorrectly;
- trailing stop is not needed, positions are insured along the Envelop line.
A trading advisor can sometimes fail, so it is recommended to hone the strategy on the test account. Having dealt with the principle of manual trading, you can accurately determine the parameters of the indicators and optimize the opening of positions. Recommended deposit – from 1000 dollars. US, but it is better to start with a cent account. If trading results on a demo account and on a cent differ by more than 10%, it should be optimized. Any questions? Ask them in the comments or contact the support service of the broker AMarkets directly!