Bollinger Bands – A Strategy for Binary Options

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Each trader understands that when you trade the binary options, it’s extremely important to arm yourself with a strategy. It should consistently provide you with a positive result, working in the most risk-free format. Such a strategy is a trading, based on the use of Bollinger Bands in combination with effective oscillation instruments. Due to the increased accuracy of the combined signals, you can earn considerable profit, earning an income on 85% of open positions. And their increased recurrence will make it possible to rapidly increase the size of the operational depot capital.

Bollinger Bands

The scheme of the system work

This binary trading system is based on a highly efficient channel tool for automatic quotation analysis, which successfully determines both the trend and volatility – these are Bollinger Bands. Actually, traders consider the Bollinger Wave trading tool in binary options to be one of the most successful tools for technical analysis. Since this indicator works universally in absolutely any market situation and makes it possible to determine the moments of the highest activity of the market and the moments of attenuation of its activity. Undoubtedly, we could trade only on signals of the Bollinger Bands. But we will work on second price charts, on which, as you know, there is a lot of market noise. For this reason, to filter all false indicators from a technical tool, we will use additional oscillatory analysis tools that can clearly identify the market reversal, the beginning of a fresh short-term trend and the intensity of its movement.

So, the simple principle of operation of the indicated channel estimation tool is already known to everyone – BB form a channel on the price chart of the asset using their movings, and inside this channel they make their asset quotation fluctuations. Moments of touching at the price the frames that limit the channel are precisely the classic signals about the turn of the asset market on the chart. The moments of touching the frames with the price that limit the channel are exactly the classic signals about the reversal of the asset market on the chart. Therefore, in such a situation, you should think about the possibility of concluding a trading lot in the direction of the price upside. What will be the role of the oscillators then? – In this strategy, equally well-known tools work as additional ones – they are MACD and RSI. These indicators confirm the reversal of the exchange and a fresh wave of short-term trend. The RSI tool will demonstrate a signal that the market has reached a certain extreme level, and the MACD indicator will indicate a fixed trend.

The building of the template graphic

In our case, the building of working template is very simple. But you will certainly need a trading platform that allows you to apply the set of used technical tools of this strategy to quotes of a traded asset and, accordingly, also allows you to reconfigure them properly. In addition, it’s important that our platform executes the orders of traders without slipping, since each item will be important while working at such a dynamic pace. After all, the loss of each item can lead to the loss for the trader. In this article, we will use the Binomo trading platform that best meets the specified requirements.

So, on the asset chart, you need to set the indicators of the methodology:

  • Bollinger waves – its settings are standard;
  • RSI – set the period 10, set the level marks to 70 and 30;
  • For MACD – also leave the standard parameters;
  • Set the timeframe of the chart on M1.

And as a result, you will see approximately the following graph layout:

how to work with bollinger waves

How to conclude trading contracts, using the Bollinger Waves in the binary options

When observing the asset chart, you should wait, when the quotes will touch one of the BB channel walls, and be sure to receive confirmation signals from the oscillatory instruments. Then, you need to open a trading lot in the direction of the rebound of the price from the border of the corridor.

The trading signal for the lot UP:

  • The asset quotes during the movement approach the lower boundary of the BB corridor and upside in the opposite direction;
  • The RSI oscillator line is turning up in the extreme zone or at level 30;
  • The movings of the MACD indicator make an intersection in the upward direction:

template chart

The trading signal for the lot DOWN:

  • The asset quotes during the movement approach the upper boundary of the BB corridor and bounce in the opposite direction;
  • The RSI oscillator line is turning down in the extreme zone or at level 70;
  • The movings of the MACD indicator make an intersection in the downward direction:

Expiration time, money management strategies

Bollinger Bands

Applying the 15s timeframe to conduct a thorough market analysis as part of the strategy, the expiration date for trading lots should be set in the range from 1 to 3 minutes. In this way, we will ensure that the quotes manage to “run through” in the predicted direction a sufficient distance so that our option will close with a profit. At the same time, it is not forbidden at all to trade within the system and on higher timeframes, but do not forget that it will be necessary to calculate the expiration period additionally for other intervals.

The money management rules can significantly reduce the initially increased market risks in short-term trading – specifically, the reducing of amount of each option to a limit of 3% of financial deposit amount. And when you work with binary contracts on a small operational deposit, it’s better to choose the trading with the smallest lots. By the way, the Binomo broker has the smallest option transaction worth only 1 USD.

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Fred Smith
Fred Smith / автор статьи
My name is Fred Smith. I graduated from the University College London UCL, and I have been trading on stock markets, binary options, and Forex for more than 10 years.
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