High profits and low-risk retracement breakout trading with Double Bollinger Bands Stop and Force Index (FRC) indicator.
Let’s learn a “simple yet powerful” retracement and breakout trading strategy.
Retracement Breakout Trading is a technical trading style.
The rationale behind it is simple.
It involves trading in the direction of forming trends.
On an uptrend market, entering long when the price breaks-out above an established resistance level after a retracement.
On a downtrend market, entering short when the price breaks-out below an established support level after a retracement.
The BBands Stops indicator (Bollinger Bands Stops line) is a trend indicator.
When the price is over the red curve (resistance curve), the trend is BULLISH or BEARISH if the price is below its blue line (support curve).
Take alook at the image below.
It’s built with Bollinger Bands phases and act pretty much like a Supertrend, the Bollinger Bands Stops line can also be used to determiner stoploss when you jump in a trend given by its signals (drawn with big “bullets” on chart).
Bollinger bands period and deviation can be changed in any settings so we can use multiple Bollinger Bands Stops indicator to maximize your trading accuracy.
Take a look at the image below.
- The green line is a BULLISH Bollinger Bands Stops (trend filter)
- The blue line is a SIGNALS Bollinger Bands Stops (trading signals)
The indicator shows good results during a trend but starts to give false signals in case of a flat. Therefore, it is recommended to use this indicator together with some other, filtering indicators.
In this trading system we use Force Index (FRC) Indicator as filter.
Force Index indicator measures the Bulls Power at each increase, and the Bears Power at each decrease.
It connects the basic elements of market information: price trend, its drops, and volumes of transactions.
This index can be used as it is, but it is better to approximate it with the help of Moving Average.
Approximation with the help a short moving average ( 2 intervals) contributes to finding the best opportunity to open and close positions. If the approximations are made with a long Moving Average (period 13), the index shows the trends and their changes.
- It is better to BUY when the forces become minus (fall below zero) in the period of indicator increasing tendency;
- The force index signalizes the continuation of the increasing tendency when it increases to the new peak;
- The signal to SELL comes when the index becomes positive during the decreasing tendency;
- The force index signalizes the Bears Power and continuation of the decreasing tendency when the index falls to the new trough;
- If price changes do not correlate to the corresponding changes in volume, the force indicator stays on one level, which tells you the trend is going to change soon.
The force of every market movement is characterized by its direction, scale and volume.
If the closing price of the current bar is higher than the preceding bar, the force is positive.
If the current closing price if lower than the preceding one, the force is negative.
The greater the difference in prices is, the greater the force is.
The greater the transaction volume is, the greater the force is.
The combination of Double Bollinger Bands Stops and Force Index Indicator are the main key to this high profits and low-risk system.
- Best Time Frames: H1 or higher
- Most Recommended Currency Pairs: GBPUSD and EURUSD. But you can use the system for all currency pairs.
- Bollinger Bands Stops
- Force Index Indicator
- SHI Silver Trend Sig Alert
- Heiken Ashi DM
- CCI Woodies
Remember to “Open BUY” after first retracement.
- 20 Bollinger Bands Stops green color line
- 8 Bollinger Bands Stops blue color line
- Heiken Ashi DM blue color
- CCI Woodies green color
- Force Index line upward and above 0 level
Remember to “Open SELL” after first retracement.
- 20 Bollinger Bands Stops Orange color line
- 8 Bollinger Bands Stops red color line
- Heiken Ashi DM red color
- CCI Woodies orange color
- Force Index line downward and below 0 level
The main challenge of Retracement Breakout trading is to identify if a break has momentum behind it.
However, you can use the Average Directional Index (ADX) indicator to analyze the strength of the retracemen breakout.
ADX is non-directional so it will quantify a TREND STRENGTH regardless of whether it is up or down.