The Bollinger Strategy
Strategies based on the Bollinger indicator are a classic of binary trading. The algorithm of this system determines price channels of asset quote movement where we can obtain highly cyclical trading signals to register options transactions. The Bollinger strategy is highly efficient – up to 85%, and it is simple to grasp for a trader with little experience in trading binary options.
The use of this system could be an excellent start in a professional trader’s career.
The Bollinger indicator for binary options
Until recently, sets of indicators on options platforms had been very rare, to be more precise, they could not be found in any version of a trading terminal for binary trading. But the Binomo company has made a breakthrough in this matter by introducing a completely new platform with a set of indicators, which includes the Bollinger indicator. We will use this platform to demonstrate the system and recommend that you use it to trade binary options.
Thus, the classic Bollinger strategy has the following rules. For starters, set the indicator on the asset price chart. The result is the construction of the following dynamic price channel:
Besides boundaries of quote fluctuations, the Bollinger indicator also determines the tilt direction of that channel. As a result, the trader receives additional information about the general trend of market movement. In binary trading, these indicators are fundamental in the question of profiting.
The Bollinger strategy signal identification
A classic signal for trading options UP on the Bollinger strategy is the touching or short-term breakthrough of the lower border of the indicator:
To trade binary options DOWN, you must wait for the touch or short-term breakthrough of quote prices of the upper Bollinger indicator borders:
This approach to binary trading gives you the opportunity to receive positive results on an average of 80% of your contracts. But the system does not always work correctly. For example, when there is a reversal of the main trend quote movement or highly volatile market fluctuations of candlestick quotes begin to line up along the border of the Bollinger indicator channel. In this case, the trader, using the classic trading signal strategy, can get a series of losing positions. In fact, such a turn of events looks as follows:
There is a small trick to eliminating losses during global trend reversals when trading on the Bollinger strategy. You just need to apply a chart filter – any oscillator indicator. We turn to the Binomo (visit website) set of indicators and choose the MACD Oscillator, which will determine the end of a protracted trend on the chart, and show us the intersection of its Moving Averages with the quote reversal point:
The probability of loss on options contracts is reduced and the efficiency of the Bollinger strategy is now increased. This simple approach is popular among pro traders.
The Bollinger strategy, regardless of whether you use its classical approaches to trading or in conjunction with additional indicators, is designed for high-frequency binary trading. Therefore, the optimal condition for producing lucrative statistics is the use of contracts with a small range of expiry. The best trader results were obtained with options expiry ranges of 60 seconds to 5 minutes.
Trading on the Bollinger strategy involves the use of classical risk limiting frameworks. The level of 3% of the amount of funds in a trading account is the limit for registering trade positions. However, given the frequency of trend reversals on the quote tick chart, we recommend using contracts with the smallest amounts of value. For example, you can use contracts from the Binomo broker (visit website), the cost of which begins at $1. In this case, trading risks will be minimized, and high frequency generation of trading signals will provide a good enough profit.