Forex Short Term Trading

Many forex indicators that available in the internet usually make different interpretation in trading activities. This makes traders confuse and hard to read the trend direction of the market. Using too many forex indicators can make traders fail to define indication of the market movement even that should be easy to read.

In this article, we will talk about how to use 2 basic technical indicators in trading. The combination of two indicators can give better return and minimize trading time. In this method we are going to use Bollinger bands indicator and moving average indicators in 15 minutes time frame chart. And we use major pairs like AUDUSD, USDJPY, GBPUSD and EURUSD.

Bollinger bands indicator is invented by John Bollinger in 1980, and patented in 2011. There are so many ways to use Bollinger bands indicator, for instances:
- Open sell trading position when the market price touches bottom line and close the position when the market price touches the middle line
- Open buy trading position when the market price touches up line and close the position when the market price touches the middle line
- Open sell trading position when the market price break down below the bottom line and close trading position when the market price reverse to above bottom line
- Open buy trading position when the market price break up upper line and close trading position when the market price reverse to below upper line
But in system that developed by Mark Larsen, a trader and an indicator expert that already has so many experiences with Bollinger bands indicator, he use 10 period setting for his Bollinger to trade.

Just take a look at the 15 minute time frame chart below. When the market price reached the lower Bollinger bands and closed above that line, so the lower Bollinger bands level can be an indicator. All we have to do is let the market price close below the lower band and that would be a confirmation trading signal to open buy trading position.

Or when the market price reached the upper band and closed below that line, so the upper band level can be an indicator. We just wait the market price close above the upper band and that would be a confirmation trading signal to open sell trading position.

Profit target
To close our trading position we can use moving average indicator, in this case we use 14 simple moving averages indicator. We use this indicator to close our trading position or to set our profit target.

I do not recommend use this trading system when the market is in sideways trend and in the news event. It is better if we know our trading risk before we open a trading position. The hardest thing is to find indication levels, because it needs accuracy and good analysis.