BB+Stochastic-Reversal Strategy

BB+Stochastic Reversal is an advanced strategy concept using the Bollinger Bands indicator and Stochastic Oscillator. To better understand the logic of this strategy, I would recommend examining both components of this strategy individually.

  1. BB-MeanReversion Strategy
  2. Stochastic-TrendReversal Strategy

Strategy Logic: The point of market reversal can be detected when the current price steps out of the Bollinger Lower Band/Upper Band. In addition to that, the Stochastic Oscillator has to exceed one of 2 preset levels – BUY LEVEL or SELL LEVEL. When the Stochastic Main Line crosses the Signal Line while the current price is still out of the Bollinger Bands, we can distinguish the 2 entry signals as described below.

The trade is closed when the current price returns to its Mean (average) value or when the opposing Stochastic Main Line and Signal Line crossover occurs.

Buy Signal:  Current price falls below the BB Lower Band and Stochastic Main Line crosses above the Signal Line under the BUY LEVEL.

Sell Signal: Current price rises above the BB Upper Band and Stochastic Main Line crosses below the Signal Line above the SELL LEVEL.

Close Signal: Current price returns to its average value (BB Mean) or opposite Stochastic entry signal occurs.

BB+Stochastic-Reversal Strategy Entry Signals

BB+Stochastic Reversal Strategy Inputs:

  • UniqueStrategyNumber – Unique strategy identifier (Magic Number), each running strategy should have a different UniqueStrategyNumber.
  • BollingerBandsPeriod – Period settings for the Bollinger Bands indicator (number of intervals from which are the Mean and Standard Deviation calculated)
  • BollingerBandsDeviation – Standard Deviation multiplier for calculating the Upper/Lower Bands
  • StochasticK – Settings for the Stochastic indicator %K line (Period settings)
  • StochasticD – Settings for the Stochastic indicator %D line (Period of %D line as an average from %K line)
  • StochasticSlowing – Settings for the Stochastic indicator Slowing (Slowing period of %K line)
  • StochasticLevelBuy – Value of the BUY LEVEL (Usually a positive number around 20)
  • StochasticLevelSell – Value of the SELL LEVEL (Usually a positive number around 80)
  • OrderSizeLots – Fixed order Size in Lots
  • StopLossPoints – Stop Loss distance from the entry price in Points (0 = No SL is set)
  • TakeProfitPoints – Take Profit distance from the entry price in Points (0 = No TP is set)
  • TrailingStopPoints – Trailing Stop distance in Points. When the Stop Loss distance from the current price is higher, the Stop Loss is adjusted closer to fit the preset level (0 = No TS is set)

Point – Minimal change in the asset quotation (usually the last digit)

Pip = 10 Points (regarding FX pairs)

Get BB+Stochastic Reversal forex strategy:

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