This is one of the popular strategies used by many professional traders in the world when trading in Binomo. The strategy of using Bollinger Bands and levels is a very simple one. However, it is very effective during the time the market moves sideways. Today’s article will do in detail about this strategy.
Trading Strategy Using Bollinger Bands Combined With Support and Resistance
– Three major asset pairs: EUR/USD, USD/CAD, USD/JPY.
– A 5-minute Japanese candlestick chart.
– Bollinger Bands setup (20,2).
– The expiration time of 15 minutes or above.
Then, you need to identify the levels (Support and Resistance) of the price. Please note that strong and weak levels correspond to different possibilities of price rebound when touching these levels.
Bollinger Bands Trading Formula
This is a trading strategy with reversal orders. Imagine as follows: When the price pierces the outer bands of the Bollinger Bands, it tends to turn back inwards. If those positions are on the static levels of the price (Support/Resistance zones), then the probability of a price reversal will be higher. This probability is high enough for us to open a profitable trade.
Open an UP order = the price falls out of the lower band of the Bollinger Bands + a candlestick closes at the Support.
Open a DOWN order = the price breaks out of the upper band of the Bollinger Bands + a candlestick closes at the Resistance.
Capital Management Methods
According to longtime traders, opening orders with a constant amount is the best way to manage capital for this strategy. With a correct rate of around 70%, this is a strategy that gives you no small profit if you follow the rules as well as have enough patience.
Things To Note About This Strategy
We have drawn a few small notes when testing this strategy in the past.
- Do not open orders consecutively.
This is a taboo in trading. Especially, this is a reversal trading strategy, then opening consecutive orders is really the number one enemy.
As in the example above, you can only open exactly one order at once. It’s when the red candle falls out of the lower band and hits the support. Then, a candlestick closes at the support and a new candlestick appears. If the price continues to go down and you continue to open orders, then you are likely to burn your account further. Remember that there is always a losing ratio to every strategy.
- Give priority to strong levels.
This is understandable. When the price crosses the bands and tests the levels, you can completely ignore weak levels. You can then open an order when the price tests a really strong level.
As the example above, weak levels locate inside the bands. They will be more easily broken than the levels outside the bands.
- Give priority to trading sessions where prices tend to move sideways.
The fact shows that when the price goes sideways, this strategy offers a correct rate of up to 90%. However, when there is a trend, this rate decreases to 40%. Be patient and wait for opportunities that the market offers you.
A demo account in Binomo will be enough for you to directly experience this strategy today. Do not forget to leave any of your questions as well as comments here. Goodbye and see you again.