Binary Options Bollinger Bands Strategy
The Binary Options Bollinger Bands Strategy is an advanced binary options strategy aimed at technical traders. It involves studying the markets to see when they have stretched too far and are likely to revert. These scenarios often cause extreme movements and you need to be ready in order to capitalize on these movements and generate a profit.
The Bollinger bands are simply two lines on a chart which move in and out towards a central band. The wider the gap the more volatile the price; the closer together; the more stable. Generally this means in a sideways direction although it can be difficult to predict the direction.
Charts And Binary Options Bollinger Bands Strategy
To apply the Binary Options Bollinger Bands Strategy you will need a dedicated charting package. Although most binary options brokers supply charts they are not detailed enough to handle this type of strategy. The majority of other charts have the ability to handle the binary options bollinger bands strategy.
The basic method of using these charts is to watch for when the price of an asset moves outside of the fluctuating outer lines on your chart. If it does so this means that the price is likely to change direction; you should place a trade in the opposite direction of the current market movement.
Successfully applying the Binary Options Bollinger Bands Strategy
One of the greatest benefits of the binary options Bollinger bands strategy when trading; is that there is no need to apply a stop loss. Your loss on any individual trade is already limited to the amount of your investment. In fact, this means that a binary options trader can use the Bollinger band strategy to create a profit even in a volatile market when many other types of traders are reluctant to trade for fear of wiping out their trading accounts.
A volatile market is good for this type of trading although there is still considerable risk associated with every trade. This makes it ideal for anyone who wants to complete short term trades.
Minimizing the Risk While Using Binary Options Bollinger Bands Strategy
The more you study the markets and the charts the easier you will find it to place successful trades. One of the best approaches is to watch for an asset which closes outside of the bands; indicating a potential price direction change. You can then study previous times it has closed outside of the bands and see on how many occasions this resulted in a price direction change. If it happens in the majority of cases it is worth the risk. This is an excellent example of using the binary options Bollinger bands strategy.
An alternative approach is to add an extra line outside of the first line. This one will need to have a slightly different period and deviation factor to the original one. If the price touches the second band you will be almost certain that it is about to change direction. Obviously the more cautious you are the more potential trades you may miss. However, the rewards for successful trades should make this worthwhile.
The Right Conditions for the Binary Options Bollinger Bands Strategy
The Binary Options Bollinger Bands Strategy is particularly suited to volatile markets and short term trades; such as one minute options. It is also important that the market is not showing any clear direction or trend. A price can move outside the Bollinger bands and continue if there is a strong trend taking it. For this reason it is essential to be aware of the general economic climate to ensure nothing is happening that is likely to affect your predictions.
