Scalping with Bollinger Bands

In this Spread betting strategy we I will show you how to scalp using the Bollinger Bands. You will need a bit of practice before you master the art of scalping and master one of the strategies that you pick. To Learn to scalp takes time and discipline, and lets not forget a lot of patience. This is one of the biggest errors traders do, they become in patient when there are no trades. Well Lets get started. I have picked the EURUSD as it is one of my favourite pairs, but you can choose a pair that you know and like.

Before we move on, here are tips on How to Scalp: Learn one strategy and dominate the technique. Learn one or two pairs and know every characteristic movement of your pair. Know what affects your market

Below I have used the EURUSD in our example as I like it as the average movement it does in a 15 minute time range is about 15 to 20 points, which is well within my risk tolerance. If you want a more volatile Forex spread betting pair, you can choose the GPBJPY or the EURJPY. they have more volatility, more action and at the same time more risk.

Bollinger Band Scalping Strategy:

Pair: EURUSD
Time Frame: 5 Minutes
Indicator Bollinger Bands: 20 moving average with 2 standard deviation (Default settings)
Time: Evening

This strategy can be applied in both sideways markets and trending markets:

1) Scalping with bollinger bands in a Sideway Markets (Mean Reverting):

The very first thing is to Identify if you are in a trending market or a sideways market. If you master one currency pair you will know when the move is over and you are in a sideways market or a certain times most markets repeat their behaviours. I have taken the EURUSD after market hours, as to accommodate people that work. This strategy is a simple concept: When the moving average is at a flat angle, and the bands are getting smaller (squeezing), this is the ideal moment to trade. Trade in the direction of the previous trend. When the price reaches the top of the band sell it and wait for it to return (mean revert) to the middle of the band. When the prices reach the bottom of the band buy the instrument and wait for it to return to the middle of the Band.

Stop loss is 10- 15 points above or below the bands:

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets

2) Scalping with bollinger bands in a trending Markets – Scalping the Pull Back:

On the other hand there has been strong news in the market you are trading it has started trending, (Note the trend is under way already), In this scalping strategy you trade the pull back. When the EURUSD moves up or down in the direction of the trend. You wait for the price to pull back to the centre line, the 20 day moving average, then you buy or sell in the direction of the trend. In the spread betting example below when the prices pull back to the centre line, you buy with stoploss below the bottom band / line and with the take profit or target when the prices reach the top band again.

Below is the same spread betting strategy applied to Rio Tinto. This to show how the same strategy can be traded in different markets.

I hope You have enjoyed this scalping strategy. If you would like more ideas you can go to the scalping strategy section. Or you can return to the spread betting example.

FTSE100 BB Scalping strategy

Scalping Strategy–FTSE100 5 min Bollinger Bands scalping

Here is a very simple strategy but you do need to familiarize yourself with this strategy before you start using this strategy. It can be effective as it can stop you out quiet frequently. You can trade this on the FTSE100 on a 1min, 5min, 15 min time frame.

Do Not trade this ahead of important data or news. Do Not Trade when there is a lot of strong bad news or good news in the market as the FTSE100 is likely to take a direction. Best to trade it after the FTSE open and before the 13.30 economic data or US open. Unless the economic data that is coming out has no importance.

Settings:
Bollinger Bands 50 period, 2 Standard deviation (magenta)
Bollinger Bands 50 period, 3 Standard deviation (blue)
Bollinger Bands 50 period, 4 Standard deviation (orange)

Spread betting Rules:
Go Long when the price crosses the first Bollinger Band (magenta) to the downside, moving towards the second Bollinger bands (Blue), when it fails to reach the blue band and moves back up, this is when you go long, with your stop loss below the low the candle.
If, instead, the prices cross the blue Bollinger band moving lower towards the orange Bollinger band but fail to break the orange band and moves back up towards the centre of the bands, again this is where you buy and go long with stoploss below the low of the candle. Remember, this time while the prices were moving lower they must not have stalled between the magenta and blue. If you get stopped out, just wait for the next signal.

Go short when the opposite happens.
Scenario A. Prices move higher breaking the magenta bollinger band but failing to reach the blue bollinger band. It moves back towards the centre of the bands, go short with stoploss just above the band.
Scenario B. Prices moves past the magenta and blue bands to then stall between blue and orange. At this point, as prices move back into the bands, tanke a short trade with stio above the spike candle.

In both scenarios, being patient and waiting for the correct setup, is the key to trading.

Ideal scenario: when the markets are trading sideways, or the market is quiet with news to come out in a few days and prices are mainly moving sideways with occasional runs up or down.

What to be careful with this spread betting system is when there is very strong news and the FTSE100 takes a direction. This is a mean reversal strategy, and we don’t want the FTSE100 to move in one direction.

Below is a Spread betting example when the strategy works really well. Prices break the first bollinger band then retraces.

This is a second example of this spread betting scalping system. Here we get stopped out as soon as prices move in a trend. As you can see from the time, it is after 13.30. There was economic data that made the markets take a trend.

Any queries, post a comment and I will be happy to answer

Back to spread betting scalping system

Bollinger Bands

Bollinger bands are a measurement of volatility. This is a very popular indicator created by John Bollinger. They can be used in many different ways. These are created by measuring the 2 standard deviation from a 20 day moving average of the price.They have three part to this technical indicator:

The moving average: This is the 20 day simple moving average of the prices

The lower band: The lower band is simple moving average minus the 2 standard deviation. therefore located below the middle band.

The upper band:The upper band is simple moving average plus the 2 standard deviation. therefore located above the middle band.

Here is an example of the Bollinger band. We have taken our spread betting graph of the WTI Crude oil:

Now lets look at how the Bollinger Bands are used in the various spread betting strategies:

Next: Bollinger Bands mean reversion strategy