Sigma Bands Forex Trading Strategy

The Sigma Bands forex trading strategy adopts a trading style that requires patience and time.

It’s recommended to use it on the higher timeframe’s starting from the 1-hour for the best possible trading results.

Obviously, this shouldn’t be much of a problem for a swing trader that understands the benefit of hanging onto positions for as long as required.

The strategy is unique in its own way, as it seeks to trade within specified bands.

Chart Setup

MetaTrader4 Indicators: Sigma_Bands.ex4 (Input Variable modified; MA Period = 14), Slope Direction Line.ex4 (default setting)

Preferred Time Frame(s): 1-Hour, 4-Hour, Day, Week

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the Sigma Bands Forex Trading Strategy

Buy Trade Example

Fig. 1.0

Strategy      

Long Entry Rules

Initiate a buy entry if the following indicator or chart pattern gets displayed:

  1. Ensure price did trade (at least an opened and closed price bar) below the lower outer blue band of the Sigma_Bands.ex4 custom indicator, before breaking above this band on its way up. This is a sign that bulls are pushing price to the upside, hence a buy is recommended.
  2. If the line of the Slope Direction Line custom indicator is painted light blue as shown on Fig. 1.0, following price bars breaking above the lower outer blue band of the Sigma_Bands.ex4 custom indicator, price is then said to be bullish i.e. a trigger to go long.

Stop Loss for Buy Entry: Place stop loss 3 pips below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions hold sway:

  1. If price breaks below two successive bands that it has previously breached on its way upwards, then an exit or take profit is advised.
  2. If the line of the Slope Direction Line turns tomato as depicted on Fig. 1.0 during a bullish trend, an exit or take profit is recommended.

Sell Entry Rules

Enter a sell order if the following holds true:

  1. Lookout for where price at least opened and closed or traded above the upper outer blue band of the Sigma_Bands.ex4 custom indicator, before breaking below same band on its way down. This is a sign that bears are pushing price to the downside, hence a sell is advised.
  2. If the line of the Slope Direction Line custom indicator is painted tomato as shown on Fig. 1.1, following price bars breaking below the upper outer blue band of the Sigma_Bands.ex4 custom indicator, price is said to be somewhat bearish i.e. a trigger to go short on the pair of interest.

Stop Loss for Sell Entry: Place stop loss 3 pips above immediate resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following chart or indicator pattern gest displayed:

  1. If price breaks above two successive bands that it has previously breached on its way downwards, then an exit or take profit is advised.
  2. If the line of the Slope Direction Line turns red as depicted on Fig. 1.1 during a bearish trend, an exit or take profit is recommended.

Sell Trade Example

Fig. 1.1

Free Download

Download the Sigma Bands Forex Trading Strategy

About The Trading Indicators

The Slope Direction Line is a trend following indicator that resembles the moving average, but offers more lag. The indicator has its period set at 80.

The Sigma_Bands.ex4 is a custom indicator that is made up of five bands, the outer upper and lower bands, the middle green upper and lower bands and the red middle line.

They wrap around price in a manner that allows us deploy this indicator in gauging resistance and support levels, as well as trends.

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