This is a trendy, principled strategy that is very simple and easy to apply. And if new swing traders know how to use and follow trading principles then this could be a strategy that helps the trader to be profitable in the long term and can develop it into his own system.

The reason for the simplicity of this strategy is that it is combined from 3 types of indicators that are very familiar to traders: RSI, Stochastic, and Bollinger Bands. Let's recall a little bit about the roles of all three types of indicators.

Relative Strength Index RSI

The RSI indicator was developed by Wells Wilder first introduced in 1978. The RSI is an indicator used to determine price momentum. Specifically, when the RSI surpasses 70, it is considered an overbought signal and vice versa if the break below 30 is considered an oversold signal. In addition, RSI is also used to determine the divergence signals that many brothers use.


This indicator was developed by George C. Lane in the late 1950s. Stochastic is also a momentum indicator used to identify overbought and oversold market signals. A stochastic below 20 is considered oversold and above 80 is considered overbought. When using Stochastic, it is very important to consider when the indicator shows its strongest momentum to avoid false signals.

Bollinger Bands

Bollinger Band is a tool developed by John Bollinger and created with the purpose of measuring market volatility. In our strategy, Bollinger Bands will be used to find trading signals. Our trading signal occurs when the price touches the upper or lower bands. However, sometimes we can also consider trading when the price touches the middle band and bounces back. However, trading signals need confirmation from other indicators such as stochastic, should be in a state of overbought or oversold for example.

Combines all indicators

Our trading strategy encompasses the following principles:

  1. Price should have high volatility when it crosses the upper or lower bands of the Bollinger Bands indicator. For buy orders, the price goes out of the upper band, and for sell orders, the price goes out of the lower band.
  2. Next check out the stochastics indicator. If the Stochastic indicator is in the overbought area (for sell orders) or oversold (for buy orders).
  3. The RSI indicator acts as an additional support indicator and the RSI should also be in the overbought or oversold zone depending on the trade order you perform.
  4. When all 3 conditions above are met, you can now trade in a candlestick that bounces back to the upper band (sell order) or lower band (enter buy order).
  5. The stop loss must be placed at nearby support and resistance levels. Take profit is also located at the support and resistance level close to the middle Bollinger band or the opposite outer band.
Note: This is a trend trading strategy, so it's best not to use them in sideways market conditions. In addition, RSI is a support indicator, the RSI overbought signal as a further confirmation signal. Indicators are mainly BB and Stochastic offline.