88# Bollinger Bands and RSI Scalping Trading System

Submit by joy22

 

The most important part of this system is having

small spread (spread is the amount of pips the

broker charges you to make a trade) I have found a

broker with amazingly small spreads which makes

this system even easier to use. I only trade the

EUR/USD with this system, I’m not saying that it

does not work on any other pairs but I only need to

trade one pair.

Select a EUR/USD 1M chart with OHLC for the bars,

it should look like the following chart.

The first indicator we are going to use is the

Bollinger Bands, once you are in your Oanda demo

account click on add study and select Bollinger

Bands with the parameters 21 and 2. You will notice

that these act as support and resistance as price

penetrates the Bollinger Bands it normally retraces

at least back to the centre line and more often

than not it will get to the opposite Band.

Using Bollinger Bands on their own is far from

profitable, we also need to know when the price is

oversold at the same time as it is outside the

Bollinger Bands.

 

The Second indicator we will be using is the RSI or Relative Strength Indicator. Click on add study and select RSI and set it to 14. You are now set up perfectly for scalping the EUR/USD lets go over the rules of this system and look at some examples of the system in action.

IMPORTANT: You must only trade this system between 2am to 5am EST, 8am to 12am EST and 7.30pm to 10pm EST. Make sure you check the spread before you

start trading to ensure that you have 1.5 pips. Do not scalp 30 minutes before a orange or red news report and not for a hour afterwards.

How Works

What we are looking for between these times is for price to move above the upper or lower Bollinger Bands and RSI raise above the 70 line or below the 30 line at the same time. Lets look at a chart.

 

As you can see price stalled at the centre line, I only got 3 pips on this trade however I hardly ever go for more that 4-5 pips per trade but please remember there are trade setups all the time. 

Examples

The first trade here hit my stop but the second

trade was a good 7 pips so overall I was in

positive. I just wanted to show you that this

system will produce some losses but it is very rare

that the second entry is a loss too.

 

 Is a 2 hour session that yielded about 20+

pips overall, I however only took 10 pips and then

stopped trading

 

Money Management

Finding entries and exits is only half the battle

you MUST manage your money well in order to be

profitable overall. I never use more than %3-5 of

my account on any one trade so if I have $10,000 in

my account I am willing to risk %5 which $500 so

for a stop of 5 pips we can trade 1 standard lot or

$10 a pip. Then once I have made 10 pips for the

day I stop trading.

Oanda will let you use micro lots so each pip is

0.10c, don’t worry if you don’t have $10,000 to fund your account yet, you can start with as little

as $500 and build your account over time!

I use a 5 pip stop on all my trades, the reason for

this is that it makes my win/loss ratio about 1:1

and I feel uncomfortable if my loss goes above 5

pips due to the amount of money I am trading.

RULES

Lets go over the rules once more to be sure you

understand everything.

First and most important you must check the time

you are trading, it must be between 2am to 5am EST,

8am to 12am EST and 7.30pm to 10pm EST.

Then you must check that there are no major news

releases due out for the USD or EUR during the time

you are planning to trade.

Do not scalp 30 minutes before a orange or red news

report and not for a hour afterwards.

A buy signal is triggered when price goes outside

the lower Bollinger Band and RSI goes below 30.

A sell signal is triggered when price goes outside

the higher Bollinger Band and RSI is above 70.

Every trade has a 5 pip stop and I normally aim for

the centre line of the Bollinger bands or 3-4 pips

in profit.

ADVANCED RULES

The following rules are for when you have a good

understanding of the system, these rules help me

pull more pips out of the market and bring the

system from around 80% win ratio to a 90%.

If you see the market is in a strong trend down do

not enter a buy position until price has penetrated

the centre line of the Bollinger Bands up to ensure

the trend is over.

The same rule applies for a strong up trend, do not

enter a sell position until price has penetrated

the centre Bollinger Band.

This does not happen very often if you are trading

during the times I have set out. Below is an

example of a strong down trend.

 

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Write a comment

Comments: 7
  • #1

    Daniel (Tuesday, 23 July 2013 21:56)

    Doesn't the Euro tend to trend a lot? Would this scalping method work for a market that likes to trend?

  • #2

    Justin (Thursday, 14 November 2013 04:55)

    Hi, Where can I find the RSI indicator that makes the shaded areas at entry points?

  • #3

    Forextradingstrategiesresources (Thursday, 14 November 2013 20:05)

    The platform of the photo is the Tradestation Prosuite 2001

  • #4

    Denny (Wednesday, 04 December 2013 09:41)

    Hello, is it doable to use martingala money management ?

  • #5

    Ben (Friday, 03 January 2014 08:54)

    Martingale is only advisable if you can afford it, put at least 13K in ur account and then trade with 25 euro per trade. Is it still workable then? Don't think so.

    Go view statistics.

  • #6

    Dex (Friday, 03 July 2015 18:24)

    Hi, thanks for the detailed description!
    Can I understand why the specific timing? Does the timing applies to only EUR/USD or every other currency pairs?

  • #7

    jay (Monday, 04 April 2016 20:44)

    thank you for this