Combining Bollinger Bands and simple price action analysis might work wonders for your 1-hour swing trading strategy.
As intraday strategies become increasingly favored among FX and CFD traders, more people are looking for a 1-hour swing trading strategy. Swing trading tends to be more flexible than scalping while offering short-term profits that cannot be fulfilled by longer-term strategies.
How should we arrange a 1-hour swing trading strategy? All trading strategies begin with market analysis. Following the result of the analysis, we will create an executable trading plan, which will then be the beacon of our future entry and exit decisions.
Market Analysis for a 1-Hour Swing Trading Strategy
We can conduct analysis on a 1-hour time frame for any forex pair. The variety of ways a currency pair can be analyzed in the 1-hour timeframe is one of the reasons why the intraday trading approach is growing in popularity.
Every trade you make should be based on sound analysis—your own analysis, as opposed to someone else's tweets. The effort might involve looking at some technical and/or fundamental elements. There are a variety of techniques for technical analysis, such as price action or a set of technical indicators (Moving Averages, Bollinger Bands, RSI, etc.). You can also pay attention to the release of significant economic data, such as interest rates, the CPI, or labor statistics, to anticipate extraordinary price movements.
At this point, you might wonder, "What is the best indicator for 1-hour trading?" In a previous article, we talked about combining a 20-period Moving Average and 11-period RSI. You can refer to the article to learn more about it.
Of course, there are also other popular default indicators in our trading platforms that function equally well. In particular, mixing up Bollinger Bands and simple price action analysis might work wonders for your 1-hour swing trading strategy.
Price Action and Bollinger Bands
We might have to work meticulously for a period of time in order to master advanced skills related to price action. However, a simple price action strategy can be done by applying the All Candlestick Pattern indicator to a TradingView chart. Here is an example of a EUR/USD in a 1-hour chart with the aforementioned indicator and Bollinger Bands applied together.
The chart shows two sell opportunities and one buy opportunity based on several Engulfing candle patterns. Engulfing is a well-known reversal trading signal. Red BE marks a Bearish Engulfing, while blue BE marks a Bullish Engulfing signal.
You can see increasingly intense selling pressure just before the first red BE. Then a Bearish Engulfing pattern appears at exactly the same time as the candle crosses Bollinger's middle band downward. It means the bulls have lost control of the market and the bears are taking over. A similar scenario explains the second red BE.
The blue BE marks the end of a downtrend and the beginning of an uptrend. You might hesitate to take action as soon as the signal appears due to the prevalence of fake signals in shorter time frames. However, the fact that the next candle crosses Bollinger's middle band upward confirms the buy signal.
What about the D mark? D refers to the Doji candle pattern. Doji reflects indecision in the market. It usually appears during a sideways or ranging market and is not a good buy or sell signal. If you find it in your favorite chart, then let go and look for trading signals by applying the same indicator combination on other forex pairs.
So, is a 1-hour time frame good for a swing trading strategy? Yes, it is. In fact, the best time frames for swing trading strategies are 1-hour, 4-hour, daily, and weekly—sorted from the most efficient to the most relaxed approach.
Any time frame lower than 1-hour is unlikely to be useful for a swing trader because they demand a considerably more 'hands-on' approach. On the other side, we run the risk of missing important trading signals if we were to swing trade on time frames higher than 1 hour.
The 1-hour swing trading strategy is also ideal for those who are new to trading. Try it out on either Trading View's paper trading feature or your preferred broker's demo account, and then trade for real after gaining the necessary understanding.