While it is common knowledge that binary options can get you a lot of money, it seems few people understand how to do this; well, Bollinger Bands are a great way to start. Apart from numerous advantages that binary options bring to the table, along with limited exposure and no liability, people tend to think they are too complicated and unreliable. The main reason behind this way of thinking is the fact that most people have no strategy or plan of action, if they ever decide to bet on some binary options; they mostly do it in a random fashion and complain when results do not meet their expectations. And the blame is always on someone else: their predictions were on the money, but their brokers conspired against them and they were given misleading data with no way to interpret it. Luckily, Bollinger Bands will take that excuse away from them.
Bollinger Bands are a type of technical indicator trading tool meant exclusively for technical analysis. They got named by their inventor, John Bollinger. Bollinger Bands have several components: a moving average for a number of days, and an upper and a lower band, which stand for standard deviations above and below the moving average, respectively. Bollinger Bands can give you an idea about top and bottom prices for a financial instrument and help you identify any patterns in its price movement so you can capitalize on them. When used on binary options, Bollinger Bands enable you to employ a number of strategies, and we will explore one of them to give you a taste.
Bollinger Band strategies
Experience has shown that Bollinger Bands work best when applied on short-term binary options, Forex day-trading or any binary option that expires in less than 30 minutes. The expiry time is usually set at either 60 seconds, 5 minutes, 15 minutes or half an hour, but there is no reason why Bollinger Bands strategies shouldn’t work on long-term binary options as well. Keep in mind that no strategy is 100% perfect; if such a thing existed, then everyone would do it. The best you can hope for is roughly 80% success rate, so if that is not good enough for you, then you might want to consider some other line of work.
Basically, for bullish markets, call options should be taken when the price hits the top end of the Bollinger Band. For bearish markets, you need put options when the price hits the bottom end of a Bollinger Band. Note that this type of strategies usually work best in combination with Japanese candlestick charts rather than ordinary charts. This strategy will tell you if the underlying instrument is being overbought or oversold, so you can profit from it. Furthermore, it can be applied on commodities, stocks, bitcoin trading or Forex as well, so by mastering it you get a firm grasp on a multi-functional tool that will serve you well in your trading career.