Range Bands / Trend Oscillator
This strategy will show a combination of the Range Band and the Trend Oscillator to create setups which can be used to enter in trends.
Intro
This strategy is inspired by an event which happens to the best of us. Its the moment when you miss the sniper entry for a big move and question to yourself 'Crap, do I really have to wait a few days for the perfect setup to show up again?'. Well with this strategy we can enter into trends once they have started and with possible entries on the lowest of timeframes. Of course we do have to keep the HTF in mind especially when dealing with trends.
How the setup works
Like mentioned in the intro we need some sort of trend to take entries on, even though as long as volatility is in play it can work in most of the environments. To find the trend for the setups the Range band is used. In particular the midline. Then based of the direction given by the Range band and the HTF trend we can start to take entries.
The entries will be taken based on the waves shown by the Trend oscillator. This indicator gives quick waves in bullish and bearish direction. So for example if we have a Rangeband midline that is aiming upwards we want to buy a on a negative wave on the Trend oscillator thus buying the pullback.
Examples on the setup scenario
Additional notes
As seen in the examples above the Rangeband indicates the trend on which we take entries using the Trend oscillator. But since these setups are on a 2 minute chart we can not confirm the trends indicated by the Rangeband without being in line with the Higher Timeframe (HTF). So when using this strategy be sure to have a trend on the 30min / 1hr+ chart in mind.
Another aspect that boosts the profitability of this setup is using it in volatile hours. There are multiple reasons why trading in the volatile hours works best for this particular setup.
Volatility will make sure it is not a battle against spread, especially if the Stoploss gets tight
In volatility the setups are more clear and it is less likely to consolidate in a manner that gets you stuck in a particular position because there is no movement to either side
The strongest trends form in times of volatility and volume
This strategy has been tested with a focus on the Indices. It should work on every asset considering price action in the form of trends is found in every asset but for the aspect of time, it might vary with other assets compared to indices. For example, this strategy on DE40 is best traded around London open hours. And for NAS100, US30 etc. it is best traded in NY open hours.
Setup examples with TP and SL
Mentions on the TP and SL
For the TP (Take profit) usually the best placement is the previous short term high/low but of course when entering based on HTF perspective it is possible to go for higher targets or keep a part of the position for these higher targets to increase the Risk:Reward (RR) ratio.
As for SL (Stop loss) it is structure wise a good decision to put the SL under the previous low/high considering a trend makes either Higher lows (bullish) or Lower highs (Bearish). Though it can be advised to trail the SL after price moves in favor of the position to increase the RR ratio. If the previous stop is too far away for a good RR setup in the right conditions the low of the current pullback wave can also be used as SL.
Also, looking at the examples we can see that the R:R ratio is not always 2 or higher which is preferred by some traders. If this is a requirement for a particular Risk management strategy that is used alongside the trading strategy it is possible to skip setups until a setup appears that has the required RR ratio.
As conclusion we can state that this strategy might not be the easiest since it requires some form of flexibility in position placement and adjusting the TP and SL. But for the experienced trader this can be a very profitable strategy if you know when to exit or when to either move your SL to breakeven to mitigate risk exposure.
Settings
Since for this strategy we need fast pullbacks to get the setups on the lower timeframe the settings of the Range Band and the Trend Oscillator have been adjusted slightly to get a quicker performance out of them.
For the Range Band the 1 minute bands are used on the 2 minute chart so that the midlines is more adaptive and responds quicker to price changes.
On the Trend Oscillator the Trend smoothness setting has been set from 5(default) > 3. This is done with the same thought of getting a quicker response on finding potential pullbacks in a trend.
Disclaimer
This content is not financial advice and is for educational and entertainment purposes only. Practicing this strategy on a Demo account is advised. Trading with live funds brings substantial risk.
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