This forex system (is use the term system in the lightest sense of the word) is based on indicators. To be honest you have probably devised and used it, or something similar, yourself just by trying out different indicators already.
The basis for this system is a Bollingerband and a Stochastic indicator. You can use standard settings on both but I think slow stochastic set to 10,5,5 or 9,9,3 seem to work quite well. Obviously time frame can be chosen by the trader.
It seems with the use of MT4 so common these days that a lot of forex trading systems use 4hr charts for the bigger swings with intraday entries. For that reason I have used a 4hr chart in my example below. But feel free to try other periods.
1)Wait for a break of the bollingerband.
2)If the upper band is broken, look for stochastic to be overbought (oversold if lower band is broken).
3) Look for a stochastic cross reversal and breech of previous support/resistance to trigger entry.
4) Stop placed at previous high or low.
5) Profit targets/trade management are at traders discretion.
In the example above I have used a 4hr £$ chart with stander bollingerbands and a 9,9,3 slow stochastic. Yellow circles are no trades and red circles are possible trades i.e stochastic are either overbought or oversold. This does not mean that a trade was triggered in every case.
Trade A: Met all the criteria for entry
Trade B: Stochastic was not in oversold territory for entry
Trade C: Another good entry, BB broken, overbought, followed by stoch cross down and breech of previous resistance/support (blue line)
Trade D: Breech of BB and overbought but it never moved down to trigger and entry.
Obviously I have highlighted some possible trades on the chart but this is by no means a perfect system. It suffers form what I call “oscillator syndrome”. In short, as it uses a stochastic oscillator it can often get overbought/sold way before the market turns. That is why we use the break of previous support/resistance as our final entry check. And more importantly that is why we always use STOPS.
Anyway, as you can see it’s a simple forex trading system so have a play with the concept and try different settings and profit target rules (maybe try Parabolic SAR). Feel free to post any comments below.