The rules of this trading system it is best to look at examples. I will try to provide enough examples to make you understand how the system works. There are two types of inputs. Let's call the input signals white and blue for simplicity.
Trading Indicators: Bollinger Bands (20, 1) blue and Bollinger Bands (20, 1.5) white, SMA;
Trading strategy: positional;
Protective orders: StopLoss, TakeProfit.
The most important rule of the trading strategy "Bollinger on steroids
White signals are always more important than blue ones!
White signals trading strategy
My original method from which this trading strategy, was based precisely on white signals. White Signal Trading Strategy "Bollinger on Steroids is generated when price touches the white Bollinger Band indicator and then closes inside the channel. Let's look at how this works using examples.
Two green arrows
These two green arrows show when we will buy. As can be seen, in both cases, the price reached the white line of the Bollinger Bands, after which a long position was opened at the close of the candle inside the channel. For these trades the profit is fixed at SMA (moving average line)which moves every day).
Three red arrows
These three red arrows show when we selling. In all three cases the price touched the upper white line Bollinger Bandsand then closed inside the channel. As a Take Profit use the center line.
Blue signals of the "Bollinger on steroids" trading strategy
Blue signals trading strategy represent the "steroidal" part of the method. Blue signals are generated when the price is inside the channel, after which it leaves the blue line. Let's see how it works.
Green arrow trading strategy
The price was inside the channel and then crossed the blue line upwards. Note that it did not reach the white lineThat is, there was no white signal. This is the signal to open long position (Buy). At the Blue signals no take profitThe position remains open until the next white signal is generated. At that point the position is closed.
Two red arrows trading strategy
The price left the channel and crossed the blue line downwards. These trades turned out to be unprofitable. However, this is an indispensable part of even the most successful strategy.
Protective orders for the "Bollinger on steroids" strategy
Installing stop loss depends on you. Personally, for setting a stop loss I use the distance from the current price to SMA (center line). That is, if price is at 1.9635 and the center line is at 1.9435, my stop loss would be 200 pips. Some people won't like such big stop losses, but I prefer to use this tactic.