Digital Option Trading Strategy Use Bollinger Bands Indicator
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 before 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
an array of uses and trading techniques it could be applied to which range
causes it to be very simple to get mixed and/or conflicting signals. This can
be 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 excellent 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
marketplace changes. When the marketplace is calm the lines move closer
together because prices are hovering near a point of equilibrium between buyers
and sellers.
When the marketplace 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.
Also learn:
If prices are trending higher
touches towards the lower boundary and towards the mid line can be utilized as
trend following support entries, when they are 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 a couple of 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 compatible
to this sort of analysis. Make use of a Bollinger Band on the daily chart to
obtain entries with an hourly chart, or use and hourly chart to obtain signals
on the 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.
A break from the line, either the highest or bottom as well
as mid line, is definitely 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 also. A break
towards the upside is bullish, particularly if found inside an up trending
market, a break towards the downside is bearish and strong when found inside a
down trending market.
This one hour chart shows numerous bullish, trend
following line breaks that each one lead to some more candle of further upside.Source: www.iqtrick.com
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