Metatrader: Bollinger Bands + RSI combination

Bollinger bands are just the standard deviations of a Moving Average, and they are hardly able to generate profitable buy or sell signals all alone because once price approaches to any of the bands, it could indicate two things: either a continuation of the current trend or act as a dynamic resistance/support level and make the price retreat/rebound. Probable price reaction could and should be filtered, and the RSI could be the required indicators since the RSI is meant to show us oversold or overbought conditions and is also a quite accurate indicator, you can take a look at it, and be able to forecast if the approach of the current trends to the extreme ends of the band could or could not extend.

If price action accelerates reaching, let’s say, the upper band of Bollinger, yet RSI is far from overbought conditions, that’s a clear warning the rally could extend above bands. If the rally extends, only after the RSI decides to return from such conditions reentering the upper level (could be 70 or 80 depending the pair traded), while a new candle opens inside the bands, you have the price topping sign and a probable downside price movement ahead.  

On the contrary, when price is falling and approaching to the lower band of Bollinger, the oversold conditions coming from the RSI will show us if pair could rebound or not. If the RSI is under 30/20 area, only a new candle opening inside the lower band with the RSI crossing upwards from below in the mentioned area will confirm pair has bottomed and is ready for at least an upside corrective movement.

Go to the metatrader Section

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.