Bollinger Bands Trading Techniques for Digital Options
Bollinger Bands are a preferred and useful tool which will
still confuse you like a trader if applied incorrectly.
A Sword That Cuts Both Ways
Perhaps you have ever heard the saying a few sword that cuts both ways? It could be applied to lots of different things though it's basically applied to anything that is supposed to carry out something you need with the chance of hurting the user equally bad.
When one thinks of Bollinger Bands I believe it appropriate to caution traders to bring it slow, don’t get too far prior yourselves, concentrate on one use from the tool at any given time and relax.
The issue with Bollinger Bands, as I see it, is there will be numerous uses and trading techniques it could be applied to which range causes it to be very simple to get mixed and/or conflicting signals. That is a quick look into three (3) basic applications of Bollinger Bands trading techniques helpful for short term traders using IQ Option
Digital Options.
The Digital Options really certainly can be a ladder style option with expiry every 5 minutes. Traders can choose inside the money, in the money or from the money strikes to suit risk preferences.
Support and Resistance
Bollinger Bands are perfect tools for finding and confirming
support and resistance. The very best thing about them is the fact that they
give a dynamic support and resistance, once that changes as the industry
changes. When the industry is calm the lines move closer together because
prices are hovering near a point of equilibrium between buyers and sellers.
When the industry is active the lines move farther apart because prices are
volatile and support/resistance zones are shifting.
Regardless of the width, these lines can be utilized as
targets for entries and exits, like most tools these indications are best when
utilized in some form of trend following manner.
If prices are trending higher touches towards the lower boundary and towards the mid line can be utilized as trend following support entries, when trending lower touches towards the upper boundary and also the mid line can be utilized as trend following resistance entries.
If prices are trending higher touches towards the lower boundary and towards the mid line can be utilized as trend following support entries, when trending lower touches towards the upper boundary and also the mid line can be utilized as trend following resistance entries.
Multiple Time Frame Analysis
Multiple time frame analysis is the ability behind the Stochastic Power Play technique I described many weeks ago. It uses a longer time frame to work out trend and also a shorter time frame to obtain signals. Bollinger Bands work well in a time frame and therefore are like minded to this sort of analysis.
Make use of a Bollinger Band using a daily chart to obtain entries with an hourly chart, or use and hourly chart to obtain signals using a 10, 5 or 1 minute chart.
If, upon the longer time frame chart, price is bouncing up coming from the lower signal line, or up coming from the mid line, then look out for bullish entries upon the lower time frame. If, upon the longer time frame, price is moving down coming from the upper signal line, or down coming from the mid line, then look out for bearish entries upon the shorter term chart. Digital Options traders may wish to make use of a 30 minute or 1 one hour chart for trend and major support resistance then move right all the way down to 5 minute or 1 minute charts for signals.
Signal Line Breaks
Bollinger Bands are best thought of as trading ranges,
dynamic highly elastic trading ranges, that give signals in a similar manner.
When prices are ranging or range bound they're going to move up from support and down from resistance as to begin with technique I described during this post. If, however, prices break via a signal line they could provide a much stronger signal.
The caveat is it should be a firm break from the signal line since you don’t wish to confuse it having a test of resistance.
When prices are ranging or range bound they're going to move up from support and down from resistance as to begin with technique I described during this post. If, however, prices break via a signal line they could provide a much stronger signal.
The caveat is it should be a firm break from the signal line since you don’t wish to confuse it having a test of resistance.
A break from the line, either the highest or bottom as well
as mid line, is usually an indication of changing market sentiment and
constitutes a break out.
Prices could be expected to carry on on inside the direction from the break out, or in the event that they fall back as a result point to retest the point of break for support/resistance. The mid line does count in this method as It'll often provide support/resistance likewise.
Also learn:
A break towards the upside is bullish, particularly if found within the up trending market, a break towards the downside is bearish and strong when found inside a down trending market. This one hour chart shows a variety of bullish, trend following line breaks that each one bring about some more candle of further upside.
Prices could be expected to carry on on inside the direction from the break out, or in the event that they fall back as a result point to retest the point of break for support/resistance. The mid line does count in this method as It'll often provide support/resistance likewise.
Also learn:
A break towards the upside is bullish, particularly if found within the up trending market, a break towards the downside is bearish and strong when found inside a down trending market. This one hour chart shows a variety of bullish, trend following line breaks that each one bring about some more candle of further upside.
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