MACD Bollinger trading strategy

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Bollinger Bands® and MACD Strategy

Bollinger Bands® can provide invaluable signals for technical traders, and when combined with the Moving Average Convergence Divergence (MACD) indicator, gives traders insight into both volatility and momentum in the forex market .

Before reading further, be sure to understand the basics of both the Bollinger Band ® and the MACD indicator.

This article explores:

  • What is the Bollinger and MACD combination?
  • How to use Bollinger Bands® and MACD to trade forex
  • Advantages and limitations of the Bollinger Bands® and MACD system

What is the Bollinger and MACD Combination?

As the title suggests, traders can make use of Bollinger Bands® in conjunction with MACD to support trade set ups. Bollinger Bands® allow traders to view the cyclical nature of volatility while the MACD is an effective trend-following, momentum indicator.

Using these two indicators together can assist traders when making higher probability trades as they can gauge the direction and strength of an existing trend , along with volatility. As a result, traders can use the MACD to assess if a trend is picking up in momentum or slowing down and setting up for a possible breakout; while the Bollinger Band® can be used as an entry trigger and subsequent confirmation of a trade.

How to Use Bollinger Bands® and MACD to Trade Forex

Traders can trade with Bollinger Bands® and MACD in a number of different ways but two of the most common ways to trade with these two indicators involve breakouts and trend trading.

Bollinger Band® Breakout Strategy using Bollinger Bands ® and MACD

Traders looking to trade Bollinger Band® breakouts should consider the following steps:

  1. Identify a trending market using the MACD
  2. Look for divergence in the histograms of the MACD (signalling potential breakout)
  3. Look for entry on a break of the 20 moving average or trendline
  4. Look for confirmation of a breakout via a breach of the Bollinger Band®, along with increased volatility (Bollinger Bands® expanding) and increasing momentum (longer histograms)

In the GBP/NZD chart below, it is clear to see a strong downtrend where price starts to trade within a descending channel. Traders can trade the breakout by looking for slowing downward momentum (divergence in the MACD histograms).

A break of the 20 period Moving Average (centre line within the Bollinger Bands®), after witnessing bullish divergence, provides the signal to enter the long trade. The dotted line on the upper side of the channel represents trendline resistance and coincides with the 20 MA of the Bollinger band® when price breaks through it. A break of these two lines confirms that this is a significant level, further reinforcing the bullish bias.

The MACD indicator supports the bullish trade as the MACD line has crossed the signal line and continues to move above the signal line, showing strong upward momentum. The Bollinger Band® then confirms the move to the upside as price begins to “walk the band” on increased volatility (expansion of the band).

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Stops can be placed below the lower Bollinger Band® or at the low of the descending channel. Targets can be placed at a previous high or significant level of resistance – while maintaining a positive risk to reward ratio . Since there is a possibility that the breakout trade turns into a trend reversal, traders should consider multiple target levels and manually move stops up or utilize a trailing stop.

Trend Trading using Bollinger Bands ® and MACD

The Bollinger Band®, MACD combination can also be used in trending markets via the following process:

  1. Identify the trend using MACD
  2. Use bounces off the 20 MA as potential entry points (in line with the trend)
  3. Look to the MACD for confirmation of continuing momentum
  4. Use the lower (higher) band as a stop loss in an uptrend (downtrend).

The EUR/USD chart below depicts the Bollinger and MACD trend trading strategy. The MACD confirms the uptrend with MACD line above the signal line and both lines are above the zero mark. This sets the filter that traders should only be looking to enter long trades.

After the initial spike in momentum to the upside, momentum slows down and although the MACD line crosses below the signal line, these moves are on low volume and result in short term consolidation rather than a move against the current trend. The uptrend is further reinforced by the fact that price bounces off the 20 MA and continues making higher highs and higher lows.

Traders can look to enter long trades in accordance with the Bollinger Band ® Squeeze (green arrows). Long traders can either choose to exit the trade as price drops to the 20 MA or can look for a breach of the lower Bollinger Band® as the exit signal.

Traders can make use of a trailing stop or stops can be manually moved along the lower Bollinger Band® as price rises. Targets can be set at significant levels of support and resistance while maintaining adequate risk management .

A Simple Day Trading Strategy Using Bollinger & MACD

By Galen Woods in Trading Setups on October 19, 2020

This simple day trading strategy was published on by Markus Heitkoetter, a day trading coach from Rockwell Trading. He is also the author of The Simple Strategy – A Powerful Day Trading Strategy For Trading Futures, Stocks, ETFs and Forex.

This day trading setup uses the MACD indicator to identify the trend and the Bollinger Bands as a trade trigger.

The MACD parameters are:

  • 12 for the fast moving average
  • 26 for the slow moving average
  • 9 for the signal line

The Bollinger Bands settings are:

  • 12 for the moving average
  • 2 standard deviations for the bands

Trading Rules

Rules For Long Day Trade

  1. MACD above signal line and zero line
  2. Place buy stop order at the upper band of Bollinger Bands

Rules For Short Day Trade

  1. MACD below signal line and zero line
  2. Place sell stop order at the lower band of the Bollinger Bands

Trading Examples – Day Trading with Bollinger & MACD

Winning Trade

In his article, Markus Heitkoetter used the trading time frame of 4500 ticks for S&P E-mini contract. It means the chart plots a bar every 4500 trades. To keep things simple, we followed the recommended timeframe.

The day started off in congestion before having a nice bear run. This simple day trading strategy managed to catch the beginning of this bear run for a nice profit.

Let’s take a look at this trade in detail.

  1. We had the most potent bull run of the day here. However, this higher high coincided with a lower high on the MACD histogram. This occurrence is a bearish divergence, a warning sign for reversal. This bearish divergence set an excellent context for short trades.
  2. Here, prices fell, and MACD moved below both the zero line and its signal line. That was our cue for a downtrend. A sell stop order was placed at the lower Bollinger Band to anticipate a short trade.
  3. After the MACD had confirmed a downtrend, a bullish outside bar formed but had little follow-through. It was the last bullish attempt before prices broke down further.

Finally, as prices pushed through the lower Bollinger Band, our sell stop order was triggered. And we have a winner.

Losing Trade

Just like the first chart, this is a 4500 tick chart of the S&P E-mini contract on a full Globex session.

The simple day trading strategy triggered a short trade at the red arrow. It was the worst entry point for us.

Let’s break this down and try to understand what was going on.

  1. The day started off congested as shown by the increasing tails and smaller bodies on each candlestick. The constricting of the Bollinger Bands was another indicator that volatility was dropping.
  2. A congestion inevitably leads to a breakout. The three consecutive red bars was the breakout from the congestion. At the same time, MACD confirmed a downtrend for us, and we entered short at the lower Bollinger Band. (red arrow)
  3. However, the downthrust punched out a lower low that was not supported by the MACD momentum. That was a bullish divergence that warned us against taking this trade.

Ultimately, this breakout downwards turned out to be a morning fake reversal. We entered short at the low of the day.

What could be worse? (Not having a stop could be worse.)

Review – A Simple Day Trading Strategy using Bollinger and MACD

Using only two indicators and two simple steps, this is indeed a simple day trading strategy.

I have tried it on different time frames and found this day trading strategy to be surprisingly robust for catching breakout trends.

By demanding that the MACD rises not only above its signal line but also its zero line, this day trading strategy can locate short-lived intraday trends. This application of MACD is starkly different from Gerald Appel’s original basic MACD trade.

If you want to restrict yourself to only high probability trades, take setups that occur after MACD first crossed the zero line. This rule will keep you in fresh trends and not the maturing ones that are more likely to reverse.

There is a significant caveat about the exit strategy. I did not follow the exit method recommended by Markus Heitkoetter as I wanted to keep things simple.

He used a certain percentage of the average daily range of the past seven trading days to determine his stop and target size. It is a sound approach based on volatility, but it increases the number of parameters involved.

You have to choose how many days to include in your average trading range and the percentages to use for your stop and target sizes. You also have to ensure that these parameters are consistent with your trading time frame. Like what Markus Heitkoetter pointed out, he updates the tick setting for the instruments they regularly trade to account for changes in market volatility.

So, unless you can keep up with adjusting those parameters, you might want to consider a more straightforward way to exit your trade.

Bollinger Bands with the MACD – Learn How That Works

The Bollinger Bands is one of the most popular indicators, commonly used to detect signals from market consolidations. However, global financial markets don’t always trade in range. When trends appear, they overshadow the effectiveness of the indicators which lead traders to “buy low, sell high”, making the Bollinger Bands become unuseful.

How to combine the best Indicators?

The idea using the Forex indicator combination Bollinger Bands with the MACD is to avoid being confused when market conditions become unobvious. The Bollinger bands indicator only works best in ranging market. It presents bullish signals when prices approach the lower band, and bearish signals when prices reach the upper band. However, when market begins to trend, traders will suffer from tremendous losses if they follow Bollinger bands indication. Of course, if a trader is proficient enough in using the BB indicator, he can define whether the market condition is changing or not. Unfortunately, most traders fall into the trap of following “buy low, sell high” signals generated by the bands, especially Forex beginners.

The MACD itself is an effective trend-following momentum indicator. It contains a histogram and two moving average lines, enabling traders to identify and follow market trends. If traders combine the Bollinger bands with the MACD, they will be able to realize whether market is either trending or consolidating and, profit from both conditions.

How to use combined indicators Bollinger Bands and MACD?

This system could work well on various charts, from 15-minute to 1-day. Traders will have to observe the performance of the Bollinger Band indicator and MACD moving averages to confirm trading signals.

When prices continually touch the lower band of the BB indicator for a long time then start to rally, traders will take a look at MACD performance. Once the MACD line crosses above the signal line (or the MACD histogram turns above the 0.0 level), a bullish signal is confirmed.

Conversely, when prices constantly touch the upper band of the BB then start to retrace, and the MACD line crosses below the signal line (or the MACD histogram turns below the 0.0 level), traders can go short the currency pair.

There is a note when trading with this system. Traders have to wait for the candlestick to close before confirming the MACD crossovers valid.
The stop-loss level could be set 30 pips away from the entry point. The best take-profit point is when prices touch the other band of the BB indicator.

Pros and cons of the system

  • Avoid serious losing streaks;
  • Providing more accurate signals;
  • Enabling traders to profit from both consolidating and trending market conditions.


  • Requiring traders to constantly observe the charts.

If you like this strategy, you might also be interested in this Parabolic Sar Settings


See also:
  • Trading platforms
  • MetaTrader 5 Mac OS
  • MetaTrader 5 WEB
  • MetaTrader 5 for Android

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The MACD and Bollinger Band Trading Strategy For Binary Options

I think it is a given that most free binary options signal service providers are really an affiliate marketing scheme. There really is no other reason for an SSP to provide free signals unless they want you to buy something, sign up with one of their recommended brokers or harass your friends into joining. Websites providing free binary options strategies are very similar but tend to be less scammy than the SSP’s. I know, I post strategies on several websites including my own. My goal is always to provided real, useful, information for traders. This is not the case with the strategy I will be reviewing here today.

Whenever I am reviewing a strategy I also have to look into who is presenting it. Believe it or not it can make a big difference. This strategy is provided by BinaryStrategy.EU, a website dedicated to binary options strategies and broker reviews. After thoroughly checking into the strategy and website I am more convinced than ever that this is nothing more than an SEO scam set up by someone who doesn’t know much about trading and probably had to use a translator program to get the page in English.

The MACD And Bollinger Band Strategy

I like MACD and use it every day in my trading and analysis. It is one of the best and most reliable indicators I know and when added to another tool such as support/resistance lines or Bollinger Bands as is the case here today can be highly effective for binary options traders. This is the MACD And Bollinger Band Trading Strategy For Binary Options. It is designed for trading 60 Second options and uses MACD, Bollinger Bands, Candlestick Charts and a new indicator I have never heard of, the Mobile Media. It is good for trading in either direction and comes highly recommended by the author, who is not named. Signals are derived from a MACD crossover that occurs at either extreme of the Bollinger Bands. In the given example a bearish candlestick is accompanied by a bearish MACD crossover while prices are at the upper range of the B Bands. In this case a 60 Second Put option is indicated. If the signal were a bullish crossover occurring at or near the lower B Band then a call would be indicated.

Benefits Of Using This Strategy

There are some benefits to using this strategy, but not enough. First, it uses MACD. I like, know and trust MACD for analysis and trading signals. I can recommend it to newbies and experienced alike. It also uses Bollinger Bands. B Bands, and any enveloping indicator, are great tools for traders as well. Other benefits include it’s usefulness as it can be used to trade in either direction and the well defined entry points. The thing is, these are not enough to outweigh the risks involved.

Risks Of Using This Strategy

There are too many risks to using this strategy to name in one article. First and foremost, it is based on 60 Second binary options. These are the riskiest of all binary options types and not one that I would recommend to anyone. Second, it makes no attempt to determine the underlying trend or to weed out whipsaws and false signals. Utilizing trend analysis would help to alleviate false signals and improve the strategies success rate, which I will point out is not listed on the website. False signals are a real problem for this system. The chart provided by the author points out several profitable entries but overlooks a number of false signals that would more than off set the good ones. Adding risk to this strategy is the use of a new indicator, I think, called the Mobile Media. When I looked I could find no mention of this indicator anywhere on the website or elsewhere on the web. In fact, I think it is possible the author is referring to the moving average used to smooth the MACD indicator.

My Conclusions On The MACD And Bollinger Band Strategy For Binary Options

Simple strategy (Bollinger Bands, MACD)

The strategy is based on MT4 built-in indicators: Bollinger Bands and MACD. It is recommended to use default settings and H4 timeframe.

1. Bollinger Bands

Three MAs of the indicator form two bands. General idea of the strategy is based on the fact that upper and lower Bollinger bands are overbought and oversold zones respectively. After the breakdown of upper or lower MA the price is trying to go back to the middle MA of the indicator.

The breakdown of the lower line is the signal to buy.

Sell signal will appear as soon as the price chart crosses upper MA from below.

If MACD histogram crosses the zero line from above, it is a signal to sell.

Buy orders can be opened as soon as histogram enters positive zone.

This strategy is based on the data points of the moving average lines with the different p.

The strategy is based on Heiken Ashi candles and should be applied to the M30 timeframe, t.

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