EURO TRADING STRATEGY
STRATEGY #1 : The BB Gun Strategy Rules
The Set Up:
The Bollinger Band (BB) Gun Strategy utilizes two pairs of Bollinger Bands - one set at 3
Standard Deviations and the other set at 2 Standard Deviations. Both Bollinger Bands use the
standard 20 period simple moving average as the key setting. The strategy is applied to
hourly candlesticks charts. In this particular example the strategy is applied to 100K
(standard lots) but it can also be applied to 10K (mini) lots just as well. The premise is that
the inner Bollinger band acts as a screen for trend reversal or reversion to range trading
scenarios. Going long just when prices touch the lower BB can lead to many large losses,
especially if prices are trending. When prices cross the inner (2 standard deviation) Bollinger
band, we get a clearer signal of a reversal.
Currency Pairs to trade this strategy with:
-Use a 1 hr candlestick chart
-Plot one set of Bollinger bands using a standard deviation of 2 and 20 period
simple moving average (SMA)
-Plot a second set of Bollinger bands using a standard deviation of 3 and 20
period simple moving average (SMA)
-Plot a 20 period simple moving average (SMA)
1. Price first needs to touch the 3rd standard deviation Bollinger band
indicating extreme market conditions.
2. The currency pair then needs to reverse and cross the 2nd standard
deviation Bollinger band.
3. A candle then needs to form between the 2nd standard deviation BB and
the 20 period moving average. For sell signals, this means that the high of
the candle is LESS than the value of the 2nd standard deviation Bollinger
band and the low is GREATER than the 20 period moving average. For entry
signals, the low of the candle needs to be GREATER than the 2nd standard
deviation Bollinger band and the high needs to be LOWER than the
20 period simple moving average.
4. The strategy then looks to make sure that 3 candles back or less th