The effectiveness of this strategy can significantly increase when combined with the use of so-called "internal spark." We know that the price makes new highs and lows that reach Bollinger bands while ascending or descending movement. But we can not know at this point, "vysnazhylasya" Is the power of the rising or downward momentum?
Perhaps the movement will continue to open our agreement on minimum or maximum lead us to loss. So just buying at the lower band and sale of bands at the top we have not considered. We should know that momentum is weakening the movement. And help us in this "internal spark."
This candle should immediately behind a local maximum or minimum, but not exceeding them. It is as if within the range of the previous candle. At its maximum upward movement is equal to or below the maximum of the previous candle, and its minimum wage equal to or above the previous candle. If this condition is fulfilled, we can conclude that the momentum is weakening uptrend and the market is unable to create a new high and so close to its reversal.
Then we open "short" position (selling, Sell) at the opening of the third candle. And the initial Stop Loss is placed a few points above the previous peak candles.
Similarly, we use "internal" candles for the opening of "long" positions (buying, Buy). In its downward movement at least equal to or above the minimum of the previous candle, and its maximum is equal to or below the maximum of the previous candle. If this condition is fulfilled, we can conclude that the momentum of the downward movement weakens, the market is unable to create a new low and, in this regard, approaching a turn. Then we open position for purchase (Buy) at the opening of the third candle.
Initial Stop Loss is placed a few points below the minimum of the previous candle. Thus, the market itself confirms to us the changing nature of movement that allows us to properly and effectively carry trade.
Proper trading is based on the principle of "follow the trend." This means that using a trading system along the lines of Bollinger, we must open transactions only in the direction of the main trend (main trend for this currency), which is determined by the movement of prices in the long term (month, week, day), and taking into account that the market is not a topping point of the movement that is close to important levels of support or resistance.
When the main trend defined correctly and safely trade only in the direction of the main trend without opening transactions against the trend. That is, if the euro marks the upward trend in this period on long-term charts, we will be open only to the purchase agreement, through the opening of new agreements each rollback (correction) prices in downward direction.
Thus, we reduce the number of contracts traded, but enhance the security of our trade, that is, ultimately, the most important principle of work on Forex.
So, 2-3 March 2009, using this method of trading, we have discovered at least five contracts for the purchase of euro (equal opening treaties listed in the green rectangle). Due to the beginning of the ascending phase in the movement for the euro, the opening of transactions on sale we would not be performed.