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Bollinger Bands + Stochastic Oscillator

This strategy is designed to identify high-probability reversal points in the market by combining two popular indicators:

  • Bollinger Bands: Measures market volatility and identifies dynamic support and resistance levels.
  • Stochastic Oscillator: Detects overbought and oversold conditions to time reversals.

It is most effective in range-bound or sideways markets, where price frequently oscillates between support and resistance levels. 

Market Suitability & Performance

  • Suitable Market : Range-bound or sideways markets.
  • Timeframes : 5-minute, 15-minute.
  • Trade Type             : Intraday
  • Usage by                        : Top Used.
  • Success Rate : 80–90%.

Indicators & Values

  • Bollinger Bands : Period: 20, ±2 Standard Deviations.
  • Stochastic Oscillator : %K: 14, %D: 3.

Buy Setup (Long Position)

Entry Rule
  • Price touches the lower Bollinger Band.
  • Stochastic Oscillator is oversold (below 20).
  • Confirm with bullish candlestick patterns.
Exit Rule
  • Price reaches the middle or upper Bollinger Band.
  • Stochastic Oscillator exits oversold (crosses above 20).
Stop-Loss
  • Place below the lower Bollinger Band or recent swing low.
  • Entry Rule
    • Price touches the lower Bollinger Band.:
    • Stochastic Oscillator is oversold (below 20).
    • Confirm with bullish candlestick patterns.
  • Exit Rule
    • Price reaches the middle or upper Bollinger Band.
    • Stochastic Oscillator exits oversold (crosses above 20).
  • Stop-Loss
    • Place below the lower Bollinger Band or recent swing low.

Sell Setup (Short Position)

  • Entry Rule
    • Price touches the upper Bollinger Band.
    • Stochastic Oscillator is overbought (above 80).
    • Confirm with bearish candlestick patterns.
  • Exit Rule
    • Price reaches the middle or lower Bollinger Band.
    • Stochastic Oscillator exits overbought (crosses below 80).
  • Stop-Loss
    • Place above the upper Bollinger Band or recent swing high.

Advantages

  • Combines volatility and momentum for accurate entries.
  • Effective in range-bound markets.
  • Beginner-friendly.

Key Disadvantages

  • Ineffective in strong trends.
  • May lag in volatile markets.
  • Requires precise stop-loss placement.
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