Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5
<p>As traders we would always love to have that trade that would run for a very long time in the direction of our trade. These are the types of trades that could make us very profitable in no time and can exponentially grow our yields. These are the types of trades that could make an otherwise very bland trading week into a very profitable week.</p>
<p>These types of trades typically occur during a strong trend reversal. However, it is not just that we are trading on trend reversals, we should also be able to capture the trade right at the start of the fresh trend. This makes it all the more difficult. Imagine trying to catch a reversal with as little confirmation available. Difficult? Yes. Impossible? No.</p>
<p>Trying to capture these types of reversals can be very difficult. In fact, it would not be considered as a high probability trade. However, the potential yield of a successful trade can also be so big it would make the trade worthwhile.</p>
<p>Price rejection are telltale signs of a potential reversal. These are price action characteristics showing that the market is somewhat unwilling to trade at a certain price point.</p>
<p>The question is how do we identify the price points that could be rejected? There are many ways to identify these price points. Some would use support and resistance levels, while others use overbought and oversold indications to gauge whether the price rejection is valid. Let us look into how we could anticipate these potential reversals based on price rejections using a combination of the Bollinger Bands and MACD indicators.</p>
<h2><strong>Bollinger Bands</strong></h2>
<p>The Bollinger Bands is a versatile technical indicator that can provide a lot of information for traders. It can indicate volatility, trend direction, momentum, and overbought or oversold price levels.</p>
<p>The Bollinger Bands is composed of three lines. The middle line is basically a Simple Moving Average (SMA) line, which is typically preset at 20 bar periods. The outer lines are basically standard deviations shifted above and below the middle line. These lines are typically preset at 2 standard deviations. This combination of lines forms a band like structure overlaid on the price chart.</p>
<p><img class="alignnone size-full wp-image-64182" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1.png" alt="Bollinger Band and MACD Price Rejection Forex Trading Strategy - MT5 1" width="936" height="644" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1.png 936w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1-300x206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1-768x528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1-100x70.png 100w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1-218x150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-1-436x300.png 436w" sizes="(max-width: 936px) 100vw, 936px" /></p>
<p>The Bollinger Bands can be used to identify volatility. Since the outer lines of the Bollinger Bands are based on standard deviations, the characteristics of the outer lines tend to be affected by volatility. The bands tend to contract whenever volatility is low and expand whenever volatility is high. An expanding Bollinger Band can be interpreted as a market expansion phase, while a contracting Bollinger Band can be interpreted as a market contraction phase.</p>
<p>Since, the middle line of the Bollinger Bands is a Simple Moving Average line, it can also be used to identify trend direction and bias. The trend is bullish whenever price action is usually above the middle line, and bearish whenever price action is usually below the middle line. The slope of the middle line also follows the direction of the trend. It slopes up in an uptrend, and down in a downtrend.</p>
<p>The outer line can be used both by momentum traders and mean reversal traders. Momentum traders would interpret a strong momentum breakout beyond the lines coming from a market contraction phase as a start of a strong momentum-based market pulse.</p>
<p>The same outer lines also act as dynamic support or resistance levels as these are also markers for overbought and oversold price levels. Mean reversal traders would interpret price action pushing against the outer lines as an indication of a potential mean reversal.</p>
<p>For our strategy, we will be using the Bollinger Bands as a basis for a mean reversal setup based on price rejections against the outer lines.</p>
<h2><strong>Moving Average Convergence and Divergence</strong></h2>
<p>Moving Average Convergence and Divergence (MACD) is one of the more popular oscillator types of technical indicators. It is used by many professional traders and profitable retail traders alike.</p>
<p>The MACD is an oscillator which is based on the concept of moving average crossovers. It computes for the difference of two underlying Simple Moving Average (SMA) lines, which are typically set at 12 and 26 periods. It then plots the difference has bars on its own window. This data is the main MACD line or bars. Positive bars indicate a bullish trend bias, while negative bars indicate a bearish trend bias.</p>
<p>It then computes for the Signal Line, which is an Exponential Moving Average (EMA) of the MACD line. Momentum direction may be identified based on how the MACD bars or line interact with the signal line. A MACD line above the signal line indicates a bullish momentum, while a MACD line below the signal line indicates a bearish momentum.</p>
<p>We will use the MACD as a basis for a momentum shift, which will be our entry confirmation.</p>
<h2><strong>Find Pin Bars Indicator</strong></h2>
<p>The Pin Bar candlestick pattern is a telltale sign of price rejection. If this candlestick pattern forms on a key support or resistance level, then there is a strong likelihood that price would soon reverse.</p>
<p>The pin bar pattern is basically a candlestick pattern formed by a candle with a long wick on one end and short body on the opposite end. The direction of the price rejection is based on whether the body is since the wick or tale is indicative of the direction of the price rejection.</p>
<p>The Find Pin Bars indicator is a custom indicator which helps us identify pin bar patterns. It basically plots a blue star below a candle whenever it detects a viable bullish pin bar pattern, and a red star above a candle whenever it detects a bearish pin bar pattern.</p>
<p><strong><em>Bullish Bollinger Band Price Rejection with MACD Confirmation.</em></strong></p>
<ul>
<li>The Find Pin Bars indicator should identify a bullish pin bar which pushes against the lower Bollinger Band line and plot a blue star below that candle.</li>
<li>Enter a buy order as soon as the MACD bars crosses above the signal line indicating a bullish momentum reversal.</li>
<li>Set the stop loss below the pin bar candle.</li>
<li>Close the trade as soon as the MACD bars crosses back below the signal line.</li>
</ul>
<p><img class="alignnone size-full wp-image-64181" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2.png" alt="Bollinger Band and MACD Price Rejection Forex Trading Strategy - MT5 2" width="936" height="644" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2.png 936w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2-300x206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2-768x528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2-100x70.png 100w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2-218x150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-2-436x300.png 436w" sizes="(max-width: 936px) 100vw, 936px" /></p>
<p><strong><em>Bearish Bollinger Band Price Rejection with MACD Confirmation.</em></strong></p>
<ul>
<li>The Find Pin Bars indicator should identify a bearish pin bar which pushes against the upper Bollinger Band line and plot a red star above that candle.</li>
<li>Enter a sell order as soon as the MACD bars crosses below the signal line indicating a bearish momentum reversal.</li>
<li>Set the stop loss above the pin bar candle.</li>
<li>Close the trade as soon as the MACD bars crosses back above the signal line.</li>
</ul>
<p><img class="alignnone size-full wp-image-64180" src="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3.png" alt="Bollinger Band and MACD Price Rejection Forex Trading Strategy - MT5 3" width="936" height="644" srcset="https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3.png 936w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3-300x206.png 300w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3-768x528.png 768w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3-100x70.png 100w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3-218x150.png 218w, https://www.forexmt4indicators.com/wp-content/uploads/2020/07/Bollinger-Band-and-MACD-Price-Rejection-Forex-Trading-Strategy-MT5-3-436x300.png 436w" sizes="(max-width: 936px) 100vw, 936px" /></p>
<h2><strong>Conclusion</strong></h2>
<p>Trading trend reversals on the early stage of the trend reversal could sometimes be very risky. This would often mean that you are one of the first group of traders to act on the potential trend reversal. This would also mean that momentum has not yet shifted strong enough and therefore the reversal may fail. We used the MACD to somehow confirm the momentum shift. However, there is still a degree of risk in this type of trading. The good thing is that with the risk comes the high potential yields, which would make the risk worthwhile.</p>
<p><h3><span><strong><br />
Forex Trading Strategies Installation Instructions</strong></span></h3>
<p>Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5 is a combination of Metatrader 5 (MT5) indicator(s) and template.</p>
<p>The essence of this forex strategy is to transform the accumulated history data and trading signals.</p>
<p>Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5 provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.</p>
<p>Based on this information, traders can assume further price movement and adjust this strategy accordingly.</p>
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<h3><strong>How to install Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5?</strong></h3>
<ul>
<li>Download Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5.zip</li>
<li>*Copy mq5 and ex5 files to your Metatrader Directory / experts / indicators /</li>
<li>Copy tpl file (Template) to your Metatrader Directory / templates /</li>
<li>Start or restart your Metatrader Client</li>
<li>Select Chart and Timeframe where you want to test your forex strategy</li>
<li>Right click on your trading chart and hover on “Template”</li>
<li>Move right to select Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5</li>
<li>You will see Bollinger Band and MACD Price Rejection Forex Trading Strategy – MT5 is available on your Chart</li>
</ul>
<p><span><em>*Note: Not all forex strategies come with mq5/ex5 files. Some templates are already integrated with the MT5 Indicators from the MetaTrader Platform.</em></span></p>
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