Bollinger Bands and MACD
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Hello, I've learned a system from one of my friends and I would like to know your opinion since I am not an expert in trading yet.
The man has got the idea from moving average 200 that is used very often by all technical analysts, so he said let's insert Bollinger bands 200 and see how the price action adheres to its bands.
At last he came with the following system:
--- Time Frames: H4, Daily and some times H1
1- The price must penetrate or touch the outer band (upper or lower)
2- The Bollinger must be wide where the pattern touches or leaves it.
3- The pattern must breach a support or a resistance line where the price have bounced from strongly by 3 to 5 candles minimum.
4- The most important is having a divergence with MACD.
5- Reversal patterns may help also
6- Targets are Fibonacci retracements (2 positions close at 23.6%, 1 position at 38.2%, 2 positions at 50.0%) and if price was trending well above trend line leave the last position open with a trailing stop.
7- SL is put 80 to 100 pips below/above support or resistance.
8- Break even when price reaches Fibonacci 23.6%.
This system allows you to trade the reversal from the beginning with the market makers.
And for now that trader who don't speak English is making profits trading this system, and I some times copy his trades after reviewing the conditions mentioned above.
Wish your opinion will make this system better or recover any point of weakness in it.