The classic Bollinger mean reversion trade is a well established market signal. The signal occurs when the price trades outside the upper or lower Bollinger band and then reverts through it. The target then becomes the simple moving average (the midddle band).
As you can see on the AUD/SGD chart above this approach resulted in both winning trades and stop-outs over the last five weeks. One reason some traders dislike this trade is the signal (in this case) goes against the prevailing downtrend. Note too that not every reversion back up through the band saw the price reach the target.
Nonetheless there is a clear reversion through the band AND a hammer candle at the potential turning point. Would you take the trade?
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