John Bollinger developed an indicator that simply takes a simple moving average and plots two standard deviations away from it on a chart. This forms the Bollginer Band indicator. The advantage of the Bollinger Band is that it automatically adjusts to volatility because the measure of standard deviation is always assessing what the market is doing. This makes the Bollinger Band one of the most popular technical indicators for stocks, futures, commodities, or currencies.

The ADX is simple way to measure trend strength in the market. The ADX is non directional and simple to read. It does not state the direction of the market but rather if the market is in a trend. Many traders can simply spot a trend by looking at charts, but when comprising automated systems it is critical to have an objective indicator to determine if there is a presence of a trend.

FXCM has an EA that can be downloaded here that trades using Bollinger Bands and the ADX. This system is similar to the other Bollinger Band system from FXCM, but this system does not used fixed stops and take profits. Rather it enters the trade much the same way by going long when price moves above the upper bollinger band and selling below the lower line. However, once the trade is in place it stays in it until the price moves all the way to the other band. This is a huge improvement as it allow profits to run much further. In any trading system it is much more likely to work when there is a potential for one or two very large trades to play out.

Findings: The EA performed vastly different on various timeframes. On the EUR/USD from 2001-2008 it generally broke even on most timeframes, but absolutely tanked on the five minute chart. This is understandable, because typically oscillators are more accurate the further out the timeframe is. EUR/USD and USD/JPY were tried on multiple timeframes without success.

Final Thoughts: It was exciting to test this EA as the combination of two oscillators showed potential for profitability. However, when applied to multiple timeframes and other currencies the system was very unreliable. It is important to note that any good trading system should work under different timeframes and for all of the major currencies. Therefore, it is not recommended to trade this EA live, but it is significantly worth exploring possible tweaks to the EA for improvement. The addition of the ADX significantly improved results from the original Bollinger Band EA