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I TESTED a "92% win rate" Bollinger Bands Trading Strategy with NO STOP LOSS - Scalping Strategy 馃槺 - YouTube
Channel: Trading Strategy Testing
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when we look at the bollinger bands it
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looks like a great indicator to trade
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forex
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the price seems to always respect the
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bands so imagine if we sell when the
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price touches the upper band and exit
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when it touches the lower one that
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sounds pretty obvious right
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how successful would this strategy be in
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your opinion that's what we'll learn
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today
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[Music]
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a few weeks ago we received a strategy
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from asim shaikik who's one of our
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subscribers he wanted us to backtest a
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simple bollinger band's trading strategy
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that according to him has a success rate
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of 90
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so far he's been back testing it
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manually using the replay mode and an
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excel spreadsheet
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thanks to sim for this strategy let's
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give it a try using an expert advisor
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this time
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the best thing about this bollinger
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bands trading strategy that sim sent us
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is its simplicity it's only relying on
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the bollinger bands indicator that i'm
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sure you guys are familiar with it's
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probably one of the most simple trading
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indicators that you can think of
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no worries i'll explain this strategy in
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detail and go through some examples from
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the chart
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we'll learn when to enter and exit the
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market and once done we'll back test the
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strategy together and see how profitable
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it is so keep watching till the end
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this strategy relies entirely on the
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bollinger bands indicator which is a
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technical analysis tool defined by a set
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of trend lines plotted two standard
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deviations positively and negatively
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away from a simple moving average of a
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securities price but which can be
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adjusted to user preferences
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bollinger bands are a type of price
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envelope developed by john bollinger the
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price envelopes define upper and lower
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price range levels
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the indicator is available on most chart
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platforms for instance if you're on
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trading view you just need to click on
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indicators then type in bollinger bands
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you can simply double click it and
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you'll see that it's been added to the
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chart
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if we check the indicator settings we
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can see that bollinger bands use two
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parameters period and standard deviation
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the default values are 20 for the period
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and 2 for standard deviations although
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you may customize the combinations
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this is a lagging indicator which is a
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tool used by traders to analyze the
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markets using an average of previous
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price action data the lagging aspect of
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indicators will get traders into trades
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that have greater confirmation behind
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them as they are based on more data in
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other words the indicator will force
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traders to wait a bit before entering
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so how does this strategy work
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well when the price touches the upper
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band and closes above it we go short and
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we remain in the market until the price
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touches the lower band
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let's look at this example this is the
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daily euro usd chart we can see that the
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price has touched the upper bollinger
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band and close above it
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we immediately go short and exit the
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trade when the price touches the lower
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band and closes below it
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on the other hand we go long when the
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price closes below the bollinger band we
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place a buy order the price will
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eventually touch the upper band in the
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future and that's the time when we exit
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the trade
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there is no stop loss in this bollinger
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bands trading strategy
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if you've watched the video where we
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traded forex with and without stop loss
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you'd know that this strategy is a bit
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risky but we'll know the answer in a bit
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so keep watching
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as usual we'll back test this strategy
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using an expert advisor it's built
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according to this bollinger band's way
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of trading the market back testing a
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strategy using an expert advisor is the
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most accurate and fastest way to review
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any trading strategy
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you can easily find the reasons behind
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some of the losing trades and to find
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the best settings for each currency pair
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if you don't know how to build an expert
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advisor you can find people online who
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offer this service they usually charge
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up to 500 if you're looking for
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sophisticated one
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otherwise you can learn how to do that
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from a to z
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i'm going to leave a link in the
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description box to an interesting udemy
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course that you can watch to learn how
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to easily build an expert advisor even
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if you're not good with numbers and
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codes
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according to a sim who's again the guy
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who submitted this trading method the
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bollinger bands trading strategy works
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best on the daily time frame as the
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entry signals are more reliable in this
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setup
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this is our expert advisor
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let's do some adjustments before back
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testing you can see that we're on a
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daily time frame i'll run this over the
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last three years and use the euro usd
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currency pair this would work 90 of the
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time based on the manual back testing
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done by a sim
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we'll use a 1 000 initial balance and
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allow both buy and sell orders this time
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which means that the expert advisor will
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run both long and short
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i'll let the ea place as many trades as
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possible we'll enter the market whenever
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the entry conditions are met so i'll
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keep this option disabled
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other than that we'll run this back
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testing with a 1 micro lot volume size
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to avoid any early margin call we need
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to keep the take profit and stop loss
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disabled this time so the trades will
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only be closed when the price touches
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either the upper or lower bollinger
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bands
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to protect our balance we'll exit the
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trade if the price reverses
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this will allow us to protect our
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capital in case of any major price
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reversal
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let's double check all the settings then
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hit on start
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while waiting for the results don't
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forget to hit the thumbs up button and
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subscribe to the channel if this is your
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first time here you can also submit your
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trading strategy for back testing simply
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visit this link and provide the
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necessary details about your trading
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method
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we've just completed back testing
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let's look at the results now
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apparently our balance has significantly
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increased by looking at this graph we
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can assume that the drawdown is not that
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bad
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we had 46 trades in total with an
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average of one entry per month the
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success rate is more than eighty percent
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which is fantastic the drawdown is
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almost twenty percent which is
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relatively high and apparently we've
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made a profit of five hundred thirty one
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dollars and forty eight cents
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this looks like a great strategy to be
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honest with you
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but what if we run this expert advisor
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over the last 10 years instead of three
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are we going to make more profit well
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let's do it
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i'll only change the time range and run
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this expert advisor from 2011 to 2021.
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we can keep the other settings as they
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are and hit on start
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back testing customization is extremely
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important many back testing applications
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have input for commission amounts lot
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sizes margin requirements interest rates
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and many other settings
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to get the most accurate back testing
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results it's important to tune these
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settings to mimic the broker to be used
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when the system goes live
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all right these are the results we did
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make some profit at the beginning and
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managed to maintain our balance safe for
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some time but somehow our equity has
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dramatically dropped after trade number
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40.
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by analyzing the chart we can notice
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that the price was on a bearish super
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trend and many buy trades have been
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triggered here as the price was
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continuously touching the lower
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bollinger bands for more than six months
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apparently it's important to have fixed
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take profit and stop loss levels for
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every single trade to avoid this
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situation
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only by looking at the chart we can see
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that some of these 13 losing buy trades
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will be turned into winners if we adjust
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the settings accordingly
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so i would advise assim not to use this
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strategy you might end up losing a big
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part of your balance especially if
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you're stuck in a super up or down trend
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it's important to come up with an
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element that will help you filter out
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these losing trades have you considered
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a fixed risk to reward ratio
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we can clearly see that it would help us
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get rid of some of these losing trades
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and turn them into winners
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we already have this option available on
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our expert advisor so it won't be
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complicated to test
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let me know in the comments section the
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take profit and stop-loss values you
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want me to use as we continue working on
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this method
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what do you think about this bollinger
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bands trading strategy let us know in
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the comments section and don't forget to
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check out the other videos on this
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channel
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happy trading
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you
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