The candlesticks chart has many advantages. One is that you can use various technical indicators together with it. And this is what we will cover in this article. Specifically, I want to show you the method of trading that is using the Bollinger Bands together with the support and resistance levels at Olymp Trade.
- 1 What do you need to know beforehand?
- 2 Trading guidelines for using the Bollinger Bands with the support/resistance levels
- 3 When to enter the trade
- 4 Necessary measures to trade with the Bollinger Bands alongside the support/resistance on the Olymp Trade platform
- 5 Reviewing the performance of the strategy that combines the Bollinger Bands with the support/resistance
- 6 The good sides of trading with the Bollinger Bands indicator along with the support/resistance levels
- 7 Try and decide for yourself how good is trading with the Bollinger Bands along with the support/resistance levels
What do you need to know beforehand?
To employ the trading strategy which is using the Bollinger Bands and the support/resistance levels, you have to know what are they, how to apply them on the chart and what are they signaling. But do not worry, you will get all the information you need here, on the OlympTradeWiki.com website.
If you want to get familiar with the Bollinger Bands, check our guide on using Bolinger Bands.
To learn the basics about support and resistance, go to our article about using S/R levels.
You may also want to read about recognizing possible breakouts.
When you view the above articles, you will be ready for this one, that is how to trade with the use of the Bollinger Bands alongside the support/resistance levels.
Trading guidelines for using the Bollinger Bands with the support/resistance levels
In the beginning, you need to think about what currency pair you want to trade. My usual choice is the EURUSD currency pair.
Then you have to choose a timeframe. What days you wish to trade and what time of the day. You may consider the time when the currency pair of your choice has low volatility. It should be easier to monitor the market like that.
Next, you decide on a candle’s interval and the trade duration. I choose 1-minute interval candles and 1-minute lasting trades.
Eventually, think about the capital management strategy you would like to implement. I will use the simple strategy in which every trade I open will be for the amount of $10. With the expected payout of 80%, it could look like this.
When to enter the trade
Trading with the Bollinger Bands along with the support/resistance levels is based on observing the trend reversal. And only when you notice one, you may enter the trade. So when it will be?
Entering a long position
Observe the downtrend. At some point, the price will drop below the lower band of the B-Bands indicator. Moreover, it will eventually break out below the support level. You will notice a long bearish candle and another long candle will develop just after but this time it will be a bullish one. This is the time for entering a long position.
Entering a short position
When during the uptrend the price will finally reach beyond the upper band of the indicator, and it will break the resistance level at the same time, which will be a sign to open a short position. You will see a long bullish candle and a long bearish immediately afterward. That is the confirmation of the reversal of the trend.
Necessary measures to trade with the Bollinger Bands alongside the support/resistance on the Olymp Trade platform
Configure the Bollinger Bands on your chart
Once you are logged into your account at Olymp Trade, choose the EURUSD currency pair and Japanese candlesticks chart. Set the candles period for 1 minute. Now find the graphical tools feature and click on it. You will see “Bollinger Bands” among “Trend indicators”. Select it and it will be added to your chart. You can change the parameters, the color, the thickness, period, and deviation.
Draw the support and resistance levels
Click on the indicators feature again. Under “Drawing” you will find “Horizontal line” and “Trend line”. To draw the support/resistance you can use both. The difference is that the first one is infinite and the second one is limited. Remember to connect at least two lows for the support and at least two highs for the resistance.
Concentrate on the development of the candles
I want to remind you of the main rule while trading with the B-Bands and the support/resistance. You enter the trade only when the price crosses one of the B-Bands indicator bands and the support or the resistance line. And that is why you should focus on the candles. When the candle cuts the lines and the following candle is of a different color, you should enter the position lasting 1 minute.
Exemplary trades I made at Olymp Trade
I managed to make two successful trades during the session between 12.00 and 14.00. In both situations, the bullish candle raised above the upper band of the indicator and it also broke out the resistance line. When the bearish candle started to develop I instantly opened a short trade for 1 minute.
Later on, I found yet one more chance to increase my balance account. The bearish candle cut the lower band and broke the support level at the same time. Right after I saw the development of the bullish candle and I entered a 1-minute long trade.
Take a closer look at the above chart. You may notice another place where the price fell beyond the lower band. But as it didn’t go beyond the support level, it wasn’t a signal to enter the trade.
Reviewing the performance of the strategy that combines the Bollinger Bands with the support/resistance
Trading 1-minute interval candles is not that easy
You may be a bit confused because I was using 1-minute candles in my trades. Let me explain it to you. Short intervals include a bigger number of price fluctuations. And when you trade on 1-minute candles even 2 seconds movement could influence your position and lead to a loss. That is why I recommend using longer intervals. When you choose 5 minutes or more, it will be much easier to notice the potential entry points. Now, why was I using 1-minute interval candles? Well, it reveals more changes in the trend per session so I could open more positions during a given time. Hence my choice.
It is designed to trade the reversals of the trend
As I mentioned several times already, the strategy that combines the Bollinger Bands with the support/resistance levels is designed to enter the positions whenever the change in the trend occurs. So you can still trade even when the news release influences the market. You only need to examine the candlesticks patterns.
Sometimes, the change in the trend is too small to bring you a profitable transaction. Other times, you need to wait a long time before the reversal takes place. Thus, it is the strategy that requires a certain portion of patience.
Just a few signals during one session
There will be times when you would be able to open multiple trades during a session. But in most cases, the number of possible entries will be quite limited. The upside is that the majority of those entries would end up making a profit for you.
The good sides of trading with the Bollinger Bands indicator along with the support/resistance levels
A high likelihood of profitable transactions
The advantage of trading B-Bands alongside the support/resistance is that it gives the signals that will most likely take you to the victory. And why is that? Because the signals are a result of two indicators on the candlestick chart in action. You enter the trade only when all required conditions are fulfilled. That is, you set the chart, draw the support and the resistance and analyze the price. When it crosses the B-Bands line as well as the support (or the resistance), you open the position. That’s it.
The possibility to exercise patience
As I said before, sometimes it takes a long time until the market presents a good opportunity to earn. Otherwise, you have to wait and observe the candles. You have to have the patience to be able to sit tight and not to rush things. Patience is a virtue. Every good trader needs to develop the skill of patient waiting. After you master this skill, you will make a fortune in no time.
An appropriate money management
Applying appropriate money management will keep your account balance in good shape. Let’s go back to the management strategy I have decided to use here. It assumed that I would invest the same amount of $10 in all my trades. With the initial capital of $100, I could exhaust the account in ten consecutive lost transactions. But since the chances of winning using this strategy are considerably high, my account is safe.
Your principal objective, as a beginning trader, should always be to protect your balance account. Never let it decrease beyond 20%. After you have done so, you may begin to think about how to boost your account by a certain percentage each month. This will keep you in the game as it did to many other traders.
Try and decide for yourself how good is trading with the Bollinger Bands along with the support/resistance levels
I would like to remind you one more time to trade longer timeframes. I was using 1-minute interval candles. But it goes with a high risk of small price fluctuations that could ruin your results. That’s why you should start with 5-minute candles.
Open your free Olymp Trade demo account. Choose the asset and the time to trade it. Analyze the market and wait for the appearance of the perfect entry points. Exercise your patience. And also, take notes so you can revise them later on. Do your best to raise your balance in the demo account, while at the same time dealing with the unavoidable risks of the market.
It will make me happy if you share your thoughts with us. Please, use the comments section below.
Wish you good luck!
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