How do I create a trading strategy with Bollinger Bands® and the MACD?

Bollinger TrendCatcher 15min bollinger bollinger bands trend following. Technical Analysis vs Fundamental Analysis: Nicolas 11 months ago. Bollinger Bands are a technical trading tool created by John Bollinger in the early s. When you see new highs in the security's price but not on the MACD, sell your long positions or enter short positions as this indicates momentum behind the higher prices is waning, and prices will soon adjust. An increase in the moving average period would automatically increase the number of periods used to calculate the standard deviation and would also warrant an increase in the standard deviation multiplier.

Learn a simple day trading strategy using Bollinger Bands and MACD by Markus Heitkoetter. Two indicators and two steps to profit from intraday trends.

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Despite being developed before the computer age, Wilder's indicators have stood the test of time and remain extremely popular. Read the full article at: To simplify the calculation explanation, RSI has been broken down into its basic components: This RSI calculation is based on 14 periods, which is the default suggested by Wilder in his book. Losses are expressed as positive values, not negative values. The very first calculations for average gain and average loss are simple 14 period averages.

Taking the prior value plus the current value is a smoothing technique similar to that used in exponential moving average calculation. This also means that RSI values become more accurate as the calculation period extends. SharpCharts uses at least data points prior to the starting date of any chart assuming that much data exists when calculating its RSI values.

To exactly replicate our RSI numbers, a formula will need at least data points. Wilder's formula normalizes RS and turns it into an oscillator that fluctuates between zero and The normalization step makes it easier to identify extremes because RSI is range bound.

RSI is 0 when the Average Gain equals zero. There were no gains to measure. RSI is when the Average Loss equals zero. This means prices moved higher all 14 periods.

There were no losses to measure. The smoothing process affects RSI values. RS values are smoothed after the first calculation. Average Loss equals the sum of the losses divided by 14 for the first calculation.

Subsequent calculations multiply the prior value by 13, add the most recent value and then divide the total by This creates a smoothing affect. The same applies to Average Gain. Because of this smoothing, RSI values may differ based on the total calculation period.

The default look-back period for RSI is 14, but this can be lowered to increase sensitivity or raised to decrease sensitivity. The look-back parameters also depend on a security's volatility.

RSI is considered overbought when above 70 and oversold when below These traditional levels can also be adjusted to better fit the security or analytical requirements. Short-term traders sometimes use 2-period RSI to look for overbought readings above 80 and oversold readings below Despite changes in volatility and the markets over the years, RSI remains as relevant now as it was in Wilder's days.

While Wilder's original interpretations are useful to understanding the indicator, the work of Brown and Cardwell takes RSI interpretation to a new level. Adjusting to this level takes some rethinking on the part of the traditionally schooled chartists.

Wilder considers overbought conditions ripe for a reversal, but overbought can also be a sign of strength. Bearish divergences still produce some good sell signals, but chartists must be careful in strong trends when bearish divergences are actually normal. Even though the concept of positive and negative reversals may seem to undermine Wilder's interpretation, the logic makes sense and Wilder would hardly dismiss the value of putting more emphasis on price action.

Positive and negative reversals put price action of the underlying security first and the indicator second, which is the way it should be.

Bearish and bullish divergences place the indicator first and price action second. By putting more emphasis on price action, the concept of positive and negative reversals challenges our thinking towards momentum oscillators.

On the other hand the normal RSI 14 tends to give a jerky movement along with the price. You can use the smooth RSI indicator effectively to trade in trending markets as in the example shown. Do not use when RSI is close to 50 and is nearly horizontal. The Amibroker AFL for this indicator is posted below as well.

The Amibroker AFL for the above indicators is posted here. Developed by George C. Past performance is not indicative of future results. Trading may expose you to risk of loss greater than your deposits and is only suitable for experienced investors who have sufficient financial means to bear such risk. PRC is also now on YouTube, subscribe to our channel for exclusive content and tutorials. Are there any trading systems that use this indicator?

You can try to make one with the assisted creation tool in ProOrder window. Bonjour Nicolas, merci pour le travail que vous effectuez.

Je ne suis vraiment pas bon dans le codage mais grace a votre travail le trading devient plus facile. This website is dedicated to prorealtime programming. But you can ask for custom programming, as a private job, through the programming services: Register Login connect with Facebook.

Nicolas 3 months ago. Kase Dev Stop v3 Cynthia Kase standard deviation stoploss trailing stop. Nicolas Thanks for the studies. What about the switch of the trend triggered by the slow and fast pe Gianluca Hello Nicolas, my prt become stuck when i load the indicator, is there any problem with it? Would it be possible to draw two lines? Jose 3 months ago. Jose Claro, es muy sencillo de adaptar! Xusto 3 months ago. Nicolas Thank you Xusto. Thank you a lot for your contribution: Open the Preference tab from the Control Panel on the left of your screen.

Select the Bollinger Bands line on your screen. The preferences will appear in the Control Panel. Once you click on the chart, the Preference tab will go back to chart settings. TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings.

Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings. The MACD is calculated using two exponential moving averages. To change the periods used in the formula, highlight the number and type in the new value desired.

Scalping Strategy

Bollinger Bands and MACD Strategy – Sell Setup Prices rallies from the lower Bollinger Band to the upper Bollinger Band marked by points 1 and 2. A few sessions later, the MACD crosses below the 0-line, triggering a sell signal. MACD and Bollinger Bands Strategy – Use it to prevent False Breakout The main benefit of using this strategy is that the signal is not generated as soon as we penetrate the Bollinger bands, this way we’re eliminating a lot of the potential false breakout that the market is prone to do. In the MACD Bollinger Bands adaptation, the purpose of the MACD Bollinger Bands is to provide a relative definition of high and low levels of the MACD averages themselves, similar to how they are adapted the regular market.