372# The Rubber Band Trading System

Submit by JamesUK 25/10/2012


The Rubber Band
The Rubber Band

Many times when the green histogram pokes out of the black line, the price

reverses even if only for a short time. Sometimes it doesn't. That's why we

use stops. After all, we are trying to trade against the trend. So if a strong

trend is under way, the price may not turn around. That's fine. Take a small

loss and move on.

As you can see, using the Rubber Band is easy. If the green histogram pokes

through to the down side, look for prices to move higher. If the green line

pokes out to the high side, look for prices to move lower.

Now, don't rush out now and start trading. I know it's exciting! Plot the

Rubber band on your own charts and see for yourself. It's so cool seeing

where the price turned exactly on the Rubber Bands signal. However, there's

more to it. One or two refinements that take this indicator and make it into a

trading method.


Rubber Band
Rubber Band

I need to make a note. These are not trading signals. There are more steps

we'll cover in just a moment. I just want you to note how the signals and

price act. You will see that the price doesn't turn on a dime for the first

circled signal. The signal for upward price action is seen. However, the price

holds flat for a few more bars before exploding up. Based on the rules I'm

going to tell you shortly, the second signal wouldn't be taken. It doesn't

matter that it would've resulted in a good trade.

Let me make an important point. This is not the Holy Grail. This Rubber

Band indicator doesn't tap into the market. It's not revealing some hidden

architecture of the market. It's not tuning into the secrets of the big players.

There is nothing magical or mystical or even surprising about what it's



In the pictures the Rubber Band forex system in action.

Rubber Band Metatrader 4
Forex Trading System: Rubber Band Metatrader 4
compressed file archive 771 Bytes
Rubber band
Rubber band

All its doing is making a calculation based on past price action. It's coming

up with numbers that have no meaning by themselves and graphing them.

We're taking that visual information and using to give us an idea of when the

market has "stretched too far from the median." That's all. It just so happens

that it works well as being a guide post of short term market turning points.

(By the way, the example above was a four hour chart of EUR/USD.)


Rubber band
Rubber band

This is a 30 minute chart of USD/CAD. Notice that the second signal did

show an up move, but is was slight--hardly explosive. But, that's okay.

Positive pips are positive pips. (Of course unless the price turned around

before your limit order was hit, and you didn’t move your stop to breakeven.

More on this later.)


Rubber Band on Metarader 4
Rubber Band on Metarader 4

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