Reversal trading system based on Keltner channels and Bollinger Bands

The trading system that we will explain below is based solely on two indicators, the Keltner channels, and the Bollinger Bands, which are actually quite similar. It is a price reversal system that tries to find the price inversion points.

Therefore, it works best in range markets where extreme value readings of indicators such as Bollinger Bands produce more reliable results. In trending markets where it is more difficult to predict maximum or minimum extreme values, their signals have less reliability.

Since this system uses two well-known and commonly used indicators found in any technical analysis package, it can be used in any trading platform.

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Scalping trading system for 1 minute charts

This trading system is ideal for traders who only have little time to trade in the market during each session. In fact, this is a strategy developed for traders who prefer to carry out short-term transactions in which they open and close positions in minutes and not hours. Usually these types of traders, known as scalpers, use one-minute charts to enter and exit their positions.

Intraday traders in the Forex market can take advantage of the small movements that occur in different currency pairs by watching the 1-minute candlestick charts.

Like any scalping strategy, it requires active monitoring and management by the trader as he must be alert to cut losses and take profits quickly.

As always, it is advisable to practice this strategy on a demo account before trading with real money.

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Trading system with 1-2-3 pattern and Bollinger Bands

In this article we will explain a trading strategy that combines the use of Bollinger Bands and the 1-2-3 pattern, a very powerful chart pattern used by many traders in a variety of markets. It is a simple strategy as we shall see below, however, it requires mastery of a number of theoretical concepts that we will explain below.

The 1-2-3 maximum that originate in the upper bollinger band or moving average line (center line of the Bollinger Bands) and the 1-2-3 minimum which originate in the lower bollinger band or the moving average line, provide excellent signals that indicate possible changes of direction in the market. Because the 1-2-3 pattern occurs in virtually every market and any time frame, this strategy can be applied to trade in a variety of instruments and time frames, including short, medium and long term.

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Common uses of Bollinger Bands

The Bollinger Bands is a technical analysis tool developed by John Bollinger in the early 1980s.
Bollinger bands consist of three curves drawn in relation to the price. These three curves are the upper band, the lower band and the middle band. The middle band is, as a rule, a simple moving average and therefore provides information on the trend. From the midband the upper and lower bands will be calculated using a standard deviation. The interval between the upper and lower bands gives information on the volatility or market activity. By default, the parameters used are a simple moving average of 20 periods and 2 standard deviations to calculate the upper and lower bands.
(Note: on some platforms and graphical analysis software the midband is not shown).

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The Bollinger Bands

Bollinger Bands – A Great Trading Tool!

Bollinger Bands were developed by John Bollinger. During the early 1980s, Bollinger Bands were announced as a technical trading tool designed to analyze the market (in the begining it was developed for the stock market). Bollinger was the first person who first developed the method of using MA or moving averages along with two different trading bands. This sort of method was just like using an envelope to cover the both sides of a moving average. Contrary to the normal moving average where percentage calculation is important, Bollinger Bands can add as well as subtract the standard deviation which is present in a calculation. Bollinger Bands can be used to produce a definition for the high and low.  For this reason it is an indicator which can help the trader in rigorous patterns recognition. It is also a helpful tool when the trader is trying to compare the price action with the information displayed by other indicators to arrive at trading decisions.
The Bollinger Bands is an indicator that surround the price action in a price chart using two bands and today it is a standard indicator in most trading graphics packages and platforms. It is calculated from a moving average (a simple moving average) on the closing price which is enveloped by two bands that are obtained from adding and subtracting 2 standard deviations from the mean value. This measure of volatility (standard deviation) is what makes the amplitude of the bands.

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Trades against the double zero levels

One of the most overlooked aspects in trading although it is one of the most lucrative if properly understood, is the market structure. Having a deep understanding of market dynamics and micro-structure gives the trader a huge advantage and is one of the best tactics to profit with changes in the price of the currencies at intraday level. This is key for traders who prefer short-term trades.

In the Forex trading thist is crucial, because the main influence on the price movement in the intraday market is the order flow. Since in most cases, individual traders do not have access to order flow data, day traders seeking to profit from short term fluctuations have to learn to identify price areas where large orders flows should occur so that they can anticipate these orders flows in the right moment. This trading strategy with double zero levels is extremely efficient for intraday traders because it allows them to keep pace with the market makers.

When we trade at intraday level, we can not look for rebounds in all levels of support and resistance and expect winning trades in all cases. The key to a profitable intraday trade is that the trader should be selective and just open positions at the levels where there is a greater probability that a reaction will occur. For example, opening positions in psychologically important price levels, like round numbers or double zeros, is a good way to identify such opportunities.

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