Professional traders use the previous support and resistance level to trade the Bollinger band breakout strategy. In the above figure, the dynamic resistance level of the Bollinger band was breached by a strong bullish candle. Bollinger band false breakout in forex the breaching, a solid bullish candle was also printed right above the dynamic resistance level of the band.
Professional traders consider this phenomenon as strong bullish trend continuation pattern. Once the market breaches the Bollinger band professional traders wait patiently for the price to retrace back to the previous support level. Some professional use the pending order in the previous support level whereas some professional use instant trade execution with price action confirmation signal. It’s imperative that traders use the conservative entry method only since taking aggressive entry with this strategy give us very poor risk reward ratio. Traders can set their stop loss in two different ways while trading this strategy. They can set their stop loss just below the previous support level for long trade and for short setup they can use the previous resistance level. On the contrary, those who take the trade with price action confirmation signal can use the confirmation candlestick pattern and sets tight stop loss.
Professional traders only use two methods for setting up their stop loss but it becomes the little bit complex when it comes to determining the take profit level. Most of the professional traders use the next key resistance level for long trade and for short, they use key support level as their potential take profit level. Government Required Disclaimer – Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you.