Forex Open Orders and Bollinger Bands

I placed several orders last night looking for a break of the 60 pip channel in the EUR/USD and USD/CHF but neither were triggered.  I have since removed those orders and will continue to scan the market looking for setups.  Volatility is weak and I don’t see any point in entering the market until these conditions change.  If anything, you have to expect some more volatility after new Fed Chairman Bernanke gives his semiannual monetary policy testimony to House Financial Services Committee Wednesday morning.

I have not had a chance to test my newest setup strategy due to the low volume.  I noticed 2 possible setups last night in Yen crosses but the setup conditions were never met.  This setup strategy involves Keltner channels, exponential moving averages, momentum indicators, and velocity indicators.  I’ll give more details once I’ve had more time to test it. 

I’ve just started using a custom indicator called Velocity.  It performs similar to the Squeeze which was developed by John Bollinger.   Here is a brief description of the Squeeze:

Bollinger Bands employ upper and lower standard deviation bands together with a center simple moving average band around price to identify high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because equities alternate between periods of low volatility, followed by periods of high volatility, and so on - much like the calm before the storm and the inevitable inactivity afterward. 

Quite simply, when the bands are far apart, volatility is high and when close together, volatility is low.  What we’re looking for is for the bands to be close together and as they begin to separate more, the explosion of volatility and a subsequent breakout.

I find that the velocity indicator is more responsive to impending volatility.  Instead of using standard deviation like the Squeeze, velocity uses weighted moving averages.

Popularity: 3%