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 |
|
| Exit Rule |
|
| Stop-Loss |
|
- 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.