ADX and Bollinger Bands - Intraday Swing Trading Strategy - Advanced Forex Strategies

ADX and Bollinger Bands – Intraday Swing Trading Strategy

ADX and Bollinger Bands combination is one of the best 2 indicators you can combine to filter out false buy/sell signals. Since indicators are lagging behind the price, it’s recommended to use a combination of at least two or more indicators in order to avoid a lot of the false signals that these indicators may generate. This doesn’t mean that you’ll not get any false signals, but it will help you be more accurate. In this regard going forward you’ll learn how to capture some of the explosive moves you often see in the FX market.

ADX and Bollinger Bands for Swing Trading

The ADX and Bollinger Bands Strategy is a swing trading system and as a swing trading system you’ll have to have a proper trading environment otherwise you’ll be caught with trades that go nowhere. The ADX and Bollinger Bands strategy work best when the volatility is high enough to produce a big swing in price movement.

The Bollinger Bands is an indicator that helps us gauge volatility in the market as well as overbought and oversold conditions. Bollinger Bands are comprised of three bands which referred to as the upper band, the lower band and the center band. The central Band is a simple moving average, which is normally set at 20 periods and the upper and lower band represent chart points that are two standard deviations away from the moving average. Bollinger Bands are designed to give you a sense for what the volatility is in the market and how high or low prices are relative to the recent past.

On the other hand, the ADX indicator is a trend strength indicator, it’s not showing bullish or bearish signals, but all it’s trying to do is to measure whether or not we’re in a trading period and if so, how strong is that trend. This is useful information because as a swing trader a lot of times we don’t want to get into something that’s not mainly in a trading environment.

The ADX and Bollinger Bands Strategy – Trading Rules

This strategy is quite simple and we’re going to use the standard default settings on both of these indicators:

Bollinger Bands settings:

  1. Period = 20 Day Exponential Moving Averages;
  2. Deviation = 2 Standard Deviation;

ADX setting: 14 periods;

We’re only going to take a trade if the ADX indicator is above 30, that’s the minimum amount, if this condition is satisfied, then we can proceed further to look at the other conditions of this system. The conventional approach is that we need ADX to be above 20 for the market to be in a trend. Another factor in judging the strength of the trend is to have a steep slope angle pointing to the upside.

ADX and Bollinger BandsADX And Bollinger Bands Strategy – Buy Signal

This strategy works well on the 15-minute time frame but like most indicators, it works best on longer time frames like the 1H or 4H charts. A Buy signal is triggered once the ADX is above 30 and the price is trading between the central band and upper band. If these two conditions are satisfied, you enter long with a stop 10 pips below the central band. You exit the trade once the ADX slope turns lower.

ADX and Bollinger Bands - Sell SignalADX And Bollinger Bands Strategy – Sell Signal

A sell signal is triggered once the ADX is above 30 and the price is trading between the central band and lower band. If these two conditions are satisfied, you enter a short position with a stop 10 pips above the central band and exit the position once the ADX slope turns lower.


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