TMA Bands Trading System is basically a trading system that is used for swing and intraday trading. It mainly consists of TMA bands, super trend, trend identification ribbon, and pivot points. It also includes an indicator that indicates market conditions like oversold and overbought. TMA bands measure volatility. Volatility will be high in the market if bands are wide open and will be low if bands are narrow.
The fine trading strategy is that traders should avoid trading when these bands are narrow, and they should make reversal trades when they are wide. Traders try to go for a reversal buy setup when the price reaches near lower bands. On the other hand, traders always go for a reversal sell setup when the price reaches near upper bands. Upper bands provide resistance to the price, while lower bands provide support to the price.
TMA bands trading system overview
To indicate market conditions, we used the Laguerre indicator that indicates overbought and oversold products of the market. The market will be oversold if the indicator’s reading is below 0.15, and it will be overbought if the indicator shows a reading above 0.85.
Trend Identification Ribbon:
Trend Identification Ribbon is a trend indicator. The trend will be up if the color of the ribbon is white, and the trend will be down if the color of the ribbon is black. As a trend confirmation indicator, a super trend histogram is also used, along with the ribbon. The trend will be down if the histogram is red, and it will be white if the trend is up. To take an entry, traders must wait for a change in the color of the ribbon.
The pivot point:
It is used for target and stop-loss placement. Traders should target below the support levels during a short trade period and use stop loss above the resistance zone. During a long setup, traders must use stop loss below the support zone, and the target should be near the resistance zones.
For buying conditions following conditions should be fulfilled.
- – TMA Bands are wide open and price reaching near the Lower Bands.
- – The Laguerre indicator must give an oversold indicator, and the super trend and trend identification ribbon should be in buy mode.
- – For buying conditions, traders should use stop loss below support and target above the resistance level.
For selling conditions following conditions should be fulfilled.
- – TMA Bands are wide open, and price reaching should be near the upper Bands.
- – Selling would be made when the Laguerre indicator should give an overbought indication and when super trend and trend identification ribbon should always be in sell mode.
- – Traders should use Stop loss above resistance and target below the support level.
TMA trading strategy suits both scalpers and swing traders. The strategy combines a set of indicators. Hence, it can also be referred to as a trading system. Like any other system or strategy, TMA setups can be fake too. Therefore, it is prudent to limit losses and use a healthy risk to reward ratio.