The idea behind Bollinger Bands is relatively straightforward: take a simple moving average and put an upper and lower trading band around it. Thus we will use standard inputs for the Bollinger band indicator to subsequently develop a simple strategy and test the results.
Using FXCM’s Strategy Trader software, we will code a strategy based on this popular technical indicator and see the results. Download and install the Strategy Trader platform, then import the following code example from the DailyFX forex forum. We ran this strategy using the standard Bollinger Band inputs on 60min charts on the four traditional forex market majors: EURUSD, USDJPY, GBPUSD, and USDCHF. The strategy shows extended periods of underperformance and indeed, hypothetically loses a great deal of money over the past 9 years or so of trading. We will borrow insight learned through an earlier Forex Strategy Corner article on moving average crossover strategies and attempt to place a trending filter on our Bollinger Band trading technique. Entry Rule: Unchanged from earlier strategy EXCEPT system may only take long positions when 100-period Simple Moving Average (SMA) is above the 200-period SMA. The hypothetical equity curve shows that our Bollinger Band Reversal strategy performance improved a great deal with the aid of our trend filter. I encourage you to download the Strategy Trader software, visit the specified forum thread and download the pertinent code and example workspace for this strategy.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.Learn forex trading with a free practice account and trading charts from FXCM.


Version 3.0 improved refreshing of user interface, added possibility to override included indicators by custom ones, and program checks a strategy for missing indicators.
Since you've already submitted a review for this product, this submission will be added as an update to your original review. The indicator uses the standard deviation of the trading instrument to determine the width between the SMA and the bands—borrowing a popular statistical tool based on the normal distribution for random variables. When price subsequently crosses back above the lower band and closes there, place a buy stop entry order at the last value for the lower band.
We use Strategy Trader and assume a spread of 3 pips per round-trip trade on each individual pair.
If we can tell the strategy to avoid trading against the trend, then there is a reasonable chance that our performance will improve. If we know that our system only works when it trades in the direction of the trend, a trending indicator may in fact keep us out of bad trades.
In changing the strategy inputs and examining different currency pairs, you can gain a better understanding for what has historically worked with this Bollinger Band Reversal Strategy and what has not. When price crosses back below the upper band, place a sell stop entry order at the last value for the upper band. Hypothetical profit and loss is calculated on single standard lot trades using the aforementioned strategy rules. To gain a better understanding of why this strategy may have lost through specific stretches of time, we can look at specific periods of underperformance for greater insight.


One can easily think of many other strategies that could similarly benefit from this particular filter or many others. The visual interface allows users to create their own strategies in a few clicks without worrying about programming and coding the logic. Here is the official description for Forex Strategy Trader: Forex Strategy Trader is a free trading platform working via Meta Trader system. Open the "BollingerMAFilter.fxd" file and when prompted by the Strategy Language Editor, hit "OK" to import the file. In fact in an earlier article we highlighted specific market conditions for the RSI and Moving Average Crossover strategies.
All the components of a strategy can be easily found in the user-friendly menus and can save hours for anyone who has previously tried to create his own Expert Advisor in MT and found it overwhelmingly difficult. Once you have imported the Strategy Advisor, open the "BollingerMAFilter.fxw" file included in the attached zip to see examples on how you may use this in your charts. In understanding what has historically worked, we can get a better sense for how to apply this in day-to-day trading.



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