Bollinger Bands tutorial: basic indicator to predict the market
Bollinger Bands indicator is one of the most popular technical indicators of all times. Bollinger Bands tells you the direction and the strength of the trend, indicates the Moment. In that article we’ll show you how to easily master that indicator to improve your trading.
We will start with what Bollinger Bands consists of.
There are three “stripes” in that indicator: two outer lines and a central one.
If you want to go into details: the central line is a Simple Moving Average (SMA) usually set to the Period of 20. And two outer lines are standard deviations of that moving average with the coefficient of 2.
To keep it simple: the central line tells you the direction of a trend. Outer lines show you the strength of it and the Moment of change.
The trend is indicated by the central line. If quotes are above the line the trend is rising. The moment quotes get beneath the central line - the trend is changed to falling.
How do you catch the Moment:
Moment is vitally important in binary options trading. Moment is a bread and butter for every professional trader. If you catch the moment - you can make a fortune! The reverse in trend direction is a Moment. Basically, that is when the direction changes: from rise to fall or otherwise.
The easiest way to use Bollinger Bands to trade is so-called Channel trading. That is when quotes are moving in a channel created by outer lines of the indicator. That strategy can be used by anyone who can click Call or Put.
The moment you see quotes get to the higher line, you open a Put deal. Once quotes fall to the lower line - Call deal.
But notice, that currently there are no 100% correct indicator on the market. Otherwise we all would be billionaires by now!
That is why you need to make sure you see a channel movement of quotes. That quotes are bouncing between lines for quite a some time already. You should also pay attention to the width of outer lines. The moment those start to widen - be ready for a high volatility. The trend will be strong and might get hardly predictable. Be careful with that.
The usage of only Bollinger Bands indicator improves trading success for over 60%! Study it carefully, master it and use it!
Trade smart with Ayrex!