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The BBZZ support and resistance trading strategy is considered one of the most effective and successful combinations of indicators giving very good signals for trades.
It allows you to detect the emergence of short-term and medium-term trends at the very beginning. As the name implies, this strategy is built on the values of two indicators: Bollinger Bands and ZigZag. Here we will not analyze the operating principles of each of these indicators - their detailed description can be found in the Indicators section.
This trading strategy is suitable for most currency pairs. For the sake of examples in this article, we will consider its application to the EURUSD currency pair on the H1 timeframe. Having put both indicators on the chart of the currency pair, we will leave the values of the input parameters for both indicators by default: 20, 0, 2.0 for Bollinger Bands and 12, 5, 3 for the ZigZag indicator.
All we need to pay attention to in this strategy is the tops and bottoms of the ZigZag indicator and the behavior of the middle band of the BB indicator.
Conditions for opening long positions
We find on the chart the latest formed trough of the ZigZag indicator. Draw a horizontal line at the break point. The signal is considered stronger if visually on the chart it looks like the lowest point.
This horizontal line will become a support line under the following conditions:
- The middle band of the Bollinger Bands indicator should cross this line from top to bottom and return to within no more than 24 H1 candles and cross the horizontal line from bottom to top.
- Under this condition, you can consider the drawn horizontal line as a support line and open a long position at the second intersection of the middle BB band.
- Stoploss is placed at the position of the lower band of the BB indicator at the time of opening a long position.
The conditions for opening short positions
When opening short positions, the same conditions are met as when opening long positions, but in the opposite direction.
- We mark on the chart the latest formed top of the ZigZag indicator. We draw a horizontal line at the top and wait for the double intersection of this line with the middle BB band, first from the bottom up and then from top to bottom.
Conclusion
Bollinger Bands - ZigZag (BBZZ) support and resistance is a very effective and interesting strategy. Signals for this strategy appear infrequently, but the quality of these signals, provided all its conditions are met, will help make your trading more profitable and systematic.
