IQ Option Bollinger Bands Strategy

Bollinger Bands Indicator

Bollinger Bands really certainly can be a technical analysis indicator, that is what first introduced inside the 1980`s by long-time technician John Bollinger. Indicator’s main purpose usually is to predict the longer term behavior of the worth chart.

Precisely what are Bollinger bands?

Bollinger Bands contain a moving average and two trading bands. The latter are the culmination of adding (subtracting) a customary deviation to (from) a traditional moving average. In statistics, the common deviation is really a measure that's applied to qualify the volume of variation. In technical analysis, the common deviation (SD) is made to estimate price volatility relevant to an asset.

The trading bands is one standard deviation (SD) from the the moving average

To put it differently, the higher the common deviation the wider the worth number an underlying asset to the given length of time. Measuring how far the worth can deviate from its average value is useful when one hopes to predict future price fluctuations.

Take place Bollinger Bands work?

As noted above, the indicator is made of three lines : one exponential moving average and two price
channels above and below it. Price channels rely on price action, widening in the moments of high volatility and contracting when the market industry will still be. Price bands would be the standard deviations on the underlying asset and encompass the trading activity along the trend.

For investors volatility is really as important as trend direction and trend strength : volatile markets provide additional trading opportunities.

If you wish to understand how you can use Bollinger Bands in trading, then it’s crucial that you understand they're determined by one simple idea : when the worth level rises/drops far too much It's supposed to bounce back. Periods of low volatility tend to be followed by serious market movements, which can even be predicted while using help of Bollinger Bands. Each of the above can be employed by traders to work out optimal entry points.

How you can discovered?

Organising Bollinger Bands inside the IQ Option platform is straightforward. So you can do this simply visit the “Indicators” button inside the bottom left corner on the screen and pick “Bollinger Lines” due to collection available indicators.

Organising the indicator : step one

Then click “Apply” if you favor dealing with recommended settings. Otherwise, see a “Set up & apply” tab and obtain a chance to adjust the period and also the standard deviation according within your requirements.

Organising the indicator : step two

The indicator is ready for use.

How you can use Bollinger Bands in day trading?

So you can use Bollinger Bands effectively in day trading, it’s vital to understand basic characteristics of price volatility as well as applications in trading.

Being a rule, periods of low volatility are likely to be intermingled rich in volatility periods. Inside the downtrend, the worth usually fluctuates connecting lower band and the normal line. Inside the uptrend, upon the contrary, the worth lies inside the corridor connecting upper band and the dead center line.

Low and high volatility periods as identified through the Bollinger Bands indicator

The longer the market industry stays still the higher would be the chances for your upcoming volatility boost. Bollinger Bands are ideally suited to pinpoint such moments. By using indicator the trader can predict future volatility fluctuations and learn overbought/oversold positions, opening deal at one of the expedient moment.

Also read: How to trade with Parabolic SAR Indicator?

As soon as the asset leaves the “normal” price range the majority of risk-averse traders stop opening new deals and anticipate the market industry to stabilize once again.

Special features

The squeeze

The situation when the worth bands come closer together happens to be the squeeze. Such periods indicate low current volatility and potential for high volatility inside the near future. However, the indicator doesn’t provide you with the trader with the content on a specific moment in time when volatility is supposed to increment. Traders remain mostly inactive through the squeeze.

Breakouts

Approximately 90% of price action take place between the worth bands. The events that take place inside the remaining 10% of some time are called breakouts. A breakout is surely an event during which price action leaves the “normal” price range. They must not be used as trading signals as they would not provide any particulars on future trend strength and direction.

Combine and conquer

Bollinger Bands are great at showing current volatility and sometimes predicting upcoming market fluctuations but generally are not a universal trading tool. In line with Mr. Bollinger himself, this indicator ought to combined along with indicators for maximum predictive potential and effectiveness.

Conclusion

Bollinger Bands are an indicator worth learning and using in real-life trading. Not simply It's simple and useful but has also a possible of giving the trader timely buy or sell signals, as you move the majority of market participants remain unaware of the longer term trend direction.

Buying the stock when the normal line crosses below the lower Bollinger Band and selling it when the worth has bounced due to upper Bollinger line is really a widely used trading strategy rich in profit-generating potential.Source: IQ Option best indicator