The popular Bollinger Bands MT4 indicator was originally developed by John Bollinger and is used to measure the volatility of any market instrument, including currency pairs.
The indicator consists of 3 bands: the middle band and two outer bands.
Bollinger bands show us volatility in the market. When the bands are close together, volatility is low.
On the contrary, when the bands are wide, it simply means high volatility.
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Indicator Chart (EUR/USD H1)
The EUR/USD H1 Min chart below shows the Bollinger Bands forex indicator in action.
Basic Trading Signals
Traders use Bollinger Bands in various ways. Here’s an example:
Buy signal: In an up-trending market, go long at the lower band (buy on dips- oversold).
Sell signal: In a down-trending market, go short at the upper band (sell on rallies- overbought).
Bollinger Bands Indicator and Stealth Oscillator Forex Day Trading Strategy
This MT4 day trading strategy combines trend direction with momentum confirmation using the Bollinger Bands MT4 Forex Indicator and the Stealth Oscillator MT4 Forex Indicator.
The Bollinger Bands help define the market trend based on the slope of the bands: an upward sloping set of bands indicates a bullish trend and a downward sloping set indicates a bearish trend.
The Stealth Oscillator supplements this by showing a green histogram line for buy signals and a red histogram line for sell signals.
By combining trend and momentum, this strategy filters out weak trades and focuses on strong intraday moves across M15 and H1 charts.
Buy Entry Rules
- Confirm the Bollinger Bands are upward sloping, indicating a bullish trend.
- Wait for the Stealth Oscillator to show a green histogram line.
- Enter a buy trade at the close of the candle where the green histogram line appears.
- Place stop 2–3 pips below the recent swing low or the lower Bollinger Band.
- Take profit at the next key resistance level or when the Stealth Oscillator turns red.
Sell Entry Rules
- Confirm the Bollinger Bands are downward sloping, indicating a bearish trend.
- Wait for the Stealth Oscillator to show a red histogram line.
- Enter a sell trade at the close of the candle where the red histogram line appears.
- Place stop 2–3 pips above the recent swing high or the upper Bollinger Band.
- Take profit at the next key support level or when the Stealth Oscillator turns green.
Advantages
- Bollinger Bands easily reveal trend slope and potential support/resistance levels.
- Stealth Oscillator helps confirm entry timing with green and red histogram signals.
- Works effectively on M15 and H1 charts for clear intraday opportunities.
- Dynamic exits based on momentum shifts help capture larger moves.
- Trend-based filtering reduces the number of low-quality trades.
- Can be paired with price action levels for advanced confirmation.
- Clear rules help traders stay disciplined during day trading sessions.
- Suitable for traders of various experience levels.
Drawbacks
- Stealth Oscillator signals can lag slightly during fast reversals.
- Requires active monitoring to catch histogram changes in real time.
- Trade frequency may be limited in low volatility conditions.
- Some pairs with irregular volatility can produce inconsistent results.
- Discipline is required to avoid entering countertrend signals.
Example Case Study 1
On NZDUSD M15, the Bollinger Bands were sloping upward, suggesting a bullish trend.
The Stealth Oscillator turned green, signaling a buy entry.
A buy trade was opened at candle close with a stop placed 3 pips below the recent swing low.
Price continued climbing throughout the session and the position was closed at the next resistance level when the Stealth Oscillator turned red, resulting in a 28 pip gain.
Combining trend slope with momentum helped capture a strong intraday move.
Example Case Study 2
On USDCAD H1, the Bollinger Bands were sloping downward, indicating a bearish trend.
The Stealth Oscillator produced a red histogram line.
A sell trade was entered at the close of the signal candle with a stop set 2 pips above the recent swing resistance high.
Price dropped steadily, and the trade was closed at the next support area when the Stealth Oscillator turned green, capturing a 45 pip profit.
Aligning trend direction and momentum provided a high-probability day trading setup.
Strategy Tips
- Confirm trend direction on a higher timeframe before taking signals on a lower chart.
- Use support and resistance zones to refine entry and exit points for better risk/reward.
- Adjust position size according to volatility and trend strength.
- Be patient and wait for clear momentum confirmation before entering trades.
- Consider exiting partial positions near intermediate levels before full exit.
- Keep a journal to track performance and refine your entry/exit timing.
- Use alerts for histogram color changes to catch moves quickly.
- Remain disciplined and skip signals that do not align with the overall trend.
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Download the “Bands.mq4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (Bands Period, Bands Shift, Bands Deviations) Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: Volatility
