This strategy will be based on two concepts: price rejection and momentum. These two things are forms of market sentiments that could be observed on price.
To determine our area of price rejection, we will be using the Bollinger Bands’ outer bands. These outer bands, which are determined by a deviation from the mean, are areas of extremes. Price going beyond these areas could be a bit too high. What we need is for the price to show signs of rejection around these areas of extremes. This will be determined by the presence of wicks pushing against the outside of the bands. This is because wicks are telltale signs of price rejection. If we see this, then we wait for our next signal.
Indicator: 20-period Bollinger Band
Timeframe: 4-hour chart
Currency Pairs: any major pairs and crosses
Trading Session: any
Buy (Long) Trade Setup Rules
- Price should be coming from around the lower outer band (oversold area)
- Candles should have wicks below showing signs of rejection of the oversold area
- A long bullish momentum candle should close above the midline and should close within the upper one-third of its total length
- Enter a buy market order at the close of this candle
- Set the stop loss a few pips below the low of the candle
- Close the trade as a candle closes back below the midline
Sell (Short) Trade Setup Rules
- Price should be coming from around the upper outer band (overbought area)
- Candles should have wicks above showing signs of rejection of the overbought area
- A long bearish momentum candle should close below the midline and should close within the lower one-third of its total length
- Enter a sell market order at the close of this candle
- Set the stop loss a few pips above the low of the candle
- Close the trade as a candle closes back above the midline
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on the “Download Indicator” button located at the bottom of the screen.
- Save the file to your computer.
- Extract and move the files into the MT4>Indicator folder of the MetaTrader4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- And select the “Sentiment Change Forex Swing Trading Strategy” template to apply it on the chart.
Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.