Trading with Bollinger bands

Making their first steps in trading, binary options, Forex market or the stock market, beginners learn and test many different strategies. Novice traders rush from one author to another. Nevertheless, they do not receive positive results copying their patterns and experience. The reason for that is either poor understanding of the complex strategies, or inaccurate adherence to them. As practice shows, trading with Bollinger bands is one of the easiest ways of the entire strategic arsenal.

Trading with Bollinger bands

What are the advantages of Bollinger bands

This method is effective during flat, i.e. in the absence of a clear trend. Its uniqueness is that the combined indicator consists of a moving average and two bands on both sides. The latter act as dynamic levels of support and resistance. The greater the market volatility is, the farther they are from each other. The indicator parameters are usually set: period is 20 and deviation is 2. The chosen timeframe does not matter; the system works on all time periods. Moreover, it is better to watch the price position at the larger timeframes along with the Bollinger bands before entering the market.

How Bollinger bands work

The main principle of the indicator is that price must get back to the moving average deviating from it. Additionally, the more the deviation is, the greater is the likelihood of return. The boundaries of the rejection show critical levels, or levels of support and resistance. Price returns to the opposite level reaching the borders. Ideally, this is how Bollinger bands work in flat movement of the market.

How to trade with Bollinger bands

One of the main rules of this system is to enter a position with the trend that can be identified by a larger temporary scale. Most effectively, this indicator works on 5M and 15M timeframes. In the medium-term uptrend, it is recommended to buy near the lower Bollinger band. It is possible to close the position and take profit near the upper border, however, a more conservative method advises to do it when crossing the moving average. If the price has a general descending trend, one should sell at the upper boundary and close the deal on the approach to the bottom.

Experienced players use an aggressive method of trading with the help of Bollinger bands. To get the maximum possible number of points, they enter a trade both for and against the trend during a pullback. The system requires increased attention and control over open positions. In case of the slightest price movement in the opposite direction to the expected, trading must be closed. In any case, a trader takes profit only within a few points at a time. This indicator can be useful when scalping. To confirm the entry signals, it is recommended to use an oscillator, for example, RSI.

If you have tried many different systems of trading and have not found the right one, you have to assess the classic option – trading with Bollinger bands. It is easy to understand and practical to use. At its basis, you can build your own strategy having added the necessary oscillator and a couple of indicators. Although in the latter case there is usually no need, we all know that the simpler a system is, the more reliable it becomes.

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