Best Forex Indicator Combination: BB, Parabolic SAR, and RSI

Posted by Connor Wilson Apr 12, 2021

The currency strength meter can tip you off to several trading situations you should be aware of, such as the strength and weakness of a currency in relation to other currencies.

Bollinger Bands is a popular forex trading strategy constituted of three famous indicators – Bollinger Bands, Parabolic SAR, and Relative Strength Index. Based on basic trend-following principles, this strategy is highly appreciated by traders for its flexibility and profitability.

Best Forex Indicator Combination: BB, Parabolic SAR, and RSI

Bollinger Bands Pluss is a popular forex trading strategy constituted of three famous indicators – Bollinger Bands, Parabolic SAR, and Relative Strength Index. Based on basic trend-following principles, this strategy is highly appreciated by traders for its flexibility and profitability. Today, this article will show you in detail how to apply the bollinger bands trading strategies to profit from the currency market.

Overview of Combination Strategy

First, let’s break down this technical strategy. As mentioned above, the Bollinger Bands Pluss is combined with three famous indicators. The Bollinger Bands, so-called BB, is a proficient lagging indicator invented by famous trader John Bollinger. This indicator is mostly used to define trading opportunities based on market trending conditions identified. Sometimes, the BB is used as a leading beacon because it enables market watchers to envisage swing points. Meanwhile, both the Parabolic SAR and the Relative Strength Index (RSI) are developed by Welles Wilder, an American mechanical engineer turning technical analyst. The Parabolic SAR is responsible for spotting trends, therefore, it belongs to the lagging beacon group. On the contrary, the RSI is known as a very efficient and easy-to-use leading guide, widely applied to detect and confirm momentum. In this strategy, the BBs and RSI have the biggest responsibilities, while the SAR just works as an additional filter.

A Bollinger Band® is a technical analysis tool defined by a set of lines plotted two standard deviations (positively and negatively) away from a simple moving average (SMA) of the security's price, but can be adjusted to user preferences. Bollinger Bands® were developed and copyrighted by famous technical trader John Bollinger.

These three indicators are really combinative. Testing this technical system over the last 12 months, we have earned about 3000 pips, with 8 out of 10 trades ending in profit. There are more than 100 trading signals identified every month, hence, this strategy is really suitable for short-term and mid-term traders, who are able to constantly watch the trading platform.

How to trade Forex using the indicator Combination

According to the testing result, the Bollinger Bands Pluss works best on the 15-minute chart. This strategy could be applied to any currency pairs, indices, commodities and cryptocurrencies.

A bullish occasion is present when:
  • Prices pierce above the middle band of the BB;
  • The Parabolic SAR remains below prices;
  • The RSI line is above 50.
Best Forex Indicator Combination: BB, Parabolic SAR, and RSI
Conversely, a bearish opportunity is defined when:
  • Prices turn below the middle band of the BB;
  • The Parabolic SAR stays above prices;
  • The RSI line is below 50.
Best Forex Indicator Combination: BB, Parabolic SAR, and RSI
There are some important entering notes when using the system:
  • Only one position should be opened at a time;
  • The penetrating candlestick must be fully close before a signal is confirmed valid;
  • The stop-loss must be set below/above the Parabolic SAR, while the take-profit could be left open. When the RSI line enters into the overbought/oversold territory, you can exit the position.

Pros and cons

Pros:
  • Flexible and easy-to-use;
  • Requiring no custom indicators;
  • Not redrawn;
  • Engendering highly accurate trading signals;
  • Helping maximize potential profits from trends.
Cons:
  • Requiring a high level of patience;
  • Necessitating traders to constantly watch the market.

Conclusion

The indicator Combination is really an effective technical tool that allows traders to gather short-term profits from Forex market. With a lot of large advantages shown above in addition to a high win-rate (about 80%), we believe this strategy could become the best companion in your trading career given a strict following to its guidance. Anyhow, please remember there’s no 100% winning systems no matter how good they are, hence, don’t forget to use risk controlling and psychology managing methods - trader’s indispensable tools.

author

Connor Wilson

A former employee in the US Ministry of the Treasury. One of the most innovative traders ever. His strategic approach in financial market activities is precise and relevant. Trading strategies and investment portfolio development are his signature skills.

Add comment


Ваш комментарий добавлен в базу. После проверки комментария администратором он будет опубликован на сайте.