How Do I Create a Trading Strategy with Bollinger Bands® and the MACD?

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How Do I Create a Trading Strategy with Bollinger Bands® and the MACD?

Many indicators are used by technical traders to construct trading strategies. Many of these methods may also benefit average investors. You may design a lucrative trading strategy employing indicators such as Bollinger Bands and moving average convergence divergence with a little previous information (MACD).

Bollinger Bands are a series of bands that depict standard deviations that surround a security’s moving average and were devised by technical analyst and trader John Bollinger. Bollinger Bands may be used to build up lucrative trades for an asset that regularly moves within a specific range for lengthy periods of time, forming a rectangular pattern on a chart.

On laterally moving stocks, the buy-and-hold strategy yields minimal reward. However, you may profit from price volatility by purchasing at or near the lower Bollinger Band and putting limit orders to sell at or near the higher band. Swing trading is the name given to this trading approach. With this technique, you may alter the Bollinger Band parameters to a smaller standard deviation of one instead of the typical two.

MACD is often used to determine if a security is overbought or oversold, which encourages traders to use techniques that account for a potential trend reversal. Trading divergences is a popular trading method that makes use of the MACD’s strength. When you notice fresh highs in the price of a security but no new highs on the MACD, sell your long positions or initiate short positions, since this suggests that the impetus behind the higher prices is fading and prices will soon reset.

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