This swing trading system is subject to the will of the majority of traders to detect turning points in price movement (and therefore, to buy low and sell high), but to do it in the structure of trade with the trend. As tools to enter the setup used different time periods, moving averages and Bollinger bands.
Many traders want to pick tops and bottoms, than to trade with the trend. The agreement allows you to include the fact that, when used as tools include different periods, moving averages and Bollinger bands.
We begin by analyzing the daily charts to determine whether a couple is in trend and uses a 20-day Simple Moving Average to determine the trend. In technical analysis, there are many tools that can help us to diagnose the trend, but none are as simple and effective as the 20-period SMA. It includes the value of the price for a month (20 working days) and gives us a very good understanding of the average price. Therefore, if the real price moves above the "average" price, we assume that the pair is in uptrend and vice versa.
Then we come to the hourly charts to pinpoint our original point. Rotary tuning we only trade with the trend, buying heavily oversold prices in uptrend and selling prices too overbought in downtrend. How do we define these extreme overbought and oversold? Bollinger will help us to measure the cost. Bollinger bands measure final prices to calculate the standard deviation of the price of its 20-period moving average. In the case of hourly charts we use the Bollinger band with three standard deviations (3 Standard Deviation) and Bollinger bands with two standard deviations (2 Standard Deviation), to create a set of channels Bollinger bands. When price is trading in a channel trend, most of the price movement will be placed within the Bollinger bands 2 Standard Deviation and 1 Standard Deviation.
Why do we use in this particular setting parameters and 3 Standard Deviation 2 Standard Deviation? As Bollinger developed to price action in everyday scale. In order to properly trade the daily charts, which are more short-term and, therefore, more variables, we need to adapt to these extremes to get the most accurate signal. In fact, it is worth remembering the good rule of thumb - traders need to increase the value of the Bollinger Bands with any reduction in time scale. For example, five minutes to focus only lists the most oversold or overbought conditions, retailers will cost to use Bollinger Bands value 3.5 Standard Deviation or 4 Standard Deviation.
Back to our setting. Set the direction of the trend we are now seeing the price action on the hourly charts. If the price of the vacation day is in uptrend, we are looking chasovkah turn back to trend. If the price continues to trade between the lower Bollinger bands and 3 Standard Deviation 2 Standard Deviation, we are standing on the sidelines, because it shows a strong downward momentum.
The beauty of this setup is that it prevents the premature assumption of late, forcing us to wait until the price does not verify the base or top of the oscillation. In our example, once the price is higher than the closing of its lower Bollinger 2 Standard Deviation, we enter the market, using the prior swing low minus five points away. Our goal is for the first unit at a distance of half the amount of risk, and when this is achieved, we will move the stop on the rest of the position to breakeven. Then we expect that the second part will reach the upper Bollinger band and out of position only if the pair closes below the upper channel 3 Standard Deviation -2 Standard Deviation Bollinger band, suggesting that the movement of the uptrend is over.
Long trade rules
First Apply at the daily chart of the 20-period SMA and make sure that the closing price is above the moving average.
Second Open only long trades in the direction of the trend.
Third Turn to time graphs and draws two sets of Bollinger bands. The first pair of Bollinger bands should be 3 Standard Deviation, and the second - 2 Standard Deviation.
4th Once the price breaks on hourly charts, and finished above the lower channel Bollinger 3 Standard Deviation-2 Standard Deviation, buy.
5th SL expose swing low minus five points and forward risk (risk = Entry Price - Stop Price). (Traders who want to set a little more freedom, can be used to prevent the swing level of minus 10 points).
6th Aim to profit for the first half of the 50% position risk (that is, if you venture into contract 40 points profit target for the first unit is 20 points in front of the entrance).
7th When first profit target is reached, move end breakeven.
8th Come out of the second half when the price closes below the upper channel 3 Standard Deviation-2 Standard Deviation Bollinger or breakeven, whichever comes first.
Short trade rules
First Apply at the daily chart of the 20-period SMA and make sure that the closing price is below the moving average.
Second Open only short trades in the direction of the trend.
Third Turn to time graphs and draws two sets of Bollinger bands. The first pair of Bollinger bands should be 3 Standard Deviation, and the second - 2 Standard Deviation.
4th Once the price breaks on hourly charts and closes below the upper channel Bollinger 3 Standard Deviation-2 Standard Deviation, sell on the market.
5th SL expose swing, plus five points and forward risk (risk = Entry Price - Stop Price). (Traders who want to set a little more freedom, can be used to prevent the swing level of plus 10 points).
6th Aim to profit for the first half of the 50% position risk (that is, if you venture into contract 40 points profit target for the first unit is 20 points below the entrance).
7th When first profit target is reached, move end breakeven.
8th Come out of the second half when the price closes above the lower channel 3 Standard Deviation-2 Standard Deviation Bollinger or breakeven, whichever comes first.
Here are a few examples:
Step 1
March 16, 2006 in EUR / CHF is in a strong uptrend
Looking at the daily chart of the EUR / CHF in Figure 1, we can see that from the middle of March 2006 EUR / CHF was trading above its 20-day SMA, which indicates a clear uptrend.
Step 1
Couple goes out 2 Standard Deviation-3 Standard Deviation BB long position from 1.5635
Step 2
Cover half the position of 1.5651, ranging end breakeven
Step 3
Close the second half of the position of 1.5692 (57 pips)
Walking an hour, we wait until the couple will come from the area of the lower Bollinger 3 Standard Deviation-2 Standard Deviation, to open the market at 6:00 March 15, 2006, the level of 1.5635 with a stop at 1.5623, risking only 12 points. (Note that EUR / CHF -. Pair of very low volatility, so we have a very low risk because the risk is so small that we can deliver our goal of 100% risk level, instead of the usual 50%).
Regardless of our choice, we are able to take profits at 03:00 March 16, 2006, 1.5651, having taken 16 points of the first number. We then moved away the rest of the position to breakeven and order in the upper Bollinger band. While the price exceeds the upper Bollinger band and is trading within it, we are waiting, only when the price falls below the upper Bollinger band channel 3 Standard Deviation-2 Standard Deviation, we leave the rest of the position of the hour of the day March 16, 2006, at 1.5692, earning 57 points in the second part. Not bad for a deal that risked a total of 12 points.
