So many technical indicators on the Expert Option trading platform and using none?
If none has seemed to work for you, then maybe it might be because you didn’t know how exactly to use it for optimum results.
With the proper know-how on how to use a technical indicator, you can achieve so much with it.
That is exactly why we thought that you might want to know, among the many indicators, how to use the Bollinger Bands, to win your trades in Expert Option.
This is just the beginning, so begin with the Bollinger Bands and use it to get somewhere, as we bring you guides on the other indicators in the future.
So we shall begin by addressing what the Bollinger Bands indicator is, then proceed to understand the various ways the indicator can be used for profitable trading in Expert Option.
What is Bollinger Bands in Expert Option?
Bollinger Bands is a technical indicator that consists of three lines namely:
- The Middle Band Line = N-period simple moving average (SMA).
- Upper Band Line = N-period SMA + (N-period standard deviation x multiple).
- Lower Band Line= N-period SMA – (N-period standard deviation x multiple).
The standard value for N is 20. And the usual multiple applied is 2.
The Upper and Lower band lines form an envelope around a moving average of price (middle band line).
The width of that envelope depends on the price volatility (standard deviation).
That is so because the upper and lower band lines expand and contract in respect to the middle band line, according to the standard deviation of past price action, otherwise known as market volatility.
Basically, when market volatility is low, the Bollinger bandwidth will be narrow.
On the other hand, the Bollinger bandwidth will expand or be wide when market volatility is high.
The standard deviation of the upper and lower band lines from the middle line decreases with a decrease in market volatility and increases with an increase in market volatility.
How to Use Bollinger Bands to Win in Expert Option.
After you have known what Bollinger bands is, you then might be wondering how you can use it to win your trades in Expert Option. If that is your worry as it should be, then this post serves you right.
So in which ways can you make use of the Bollinger bands indicator to secure more wins in your Expert Option trading? We shall discuss the following ways among the many that do exist:
- Trading Ranging Markets with the Bollinger Bands.
- Trading Breakouts with the Bollinger Bands.
- Double Top and Double Bottom with Bollinger Bands Trading.
- Trading Outlier Bars with the Bollinger Bands.
- Trading the Gimmee Bar with the Bollinger Bands.
- The ‘MACD-Bollinger Band’ Trading.
Trading Ranging Markets with the Bollinger Bands.
Primarily, it is not Bollinger bands that will tell you that the market is ranging.
You will have to make a prior observation to establish that the market is neither trending upwards nor downwards but sideways.
That will mean that the market lacks enough volatility to move in a sustained manner either upwards or downwards, trapping it within a range.
You can then use Bollinger bands to trade such a range, but then you ask how.
In such a sideways market, you will realize that the price behaves in such a way that price bars reverse once they hit either the upper or the lower band lines.
To make it even more precise, you will realize that there are definite support and resistance levels which the sideways market seems to respect.
Once a price bar comes to a point of resistance that happens to coincide with the upper band line, then the price reverses downwards.
On the flip side, once a price bar comes to a level of support that happens to coincide with the lower band line, then the price reverses upwards.
Another very important thing to note during such a scenario is that the bandwidth of the Bollinger band indicator will be narrow.
The standard deviation of the upper and lower band lines from the middle line will be reduced due to low volatility.
Thus the bandwidth will be narrow, unlike in other cases as we shall see later.
Trading the Range with Bollinger Bands.
Is it not so easy to trade in such a market really?
It definitely is, because all you need to do is to fade moves with bars that bounce off the upper or lower band lines.
Enter a buy trade as the price bars hit the lower band line.
On the other hand, enter a sell position as the price bars hit the upper band line.
It is not enough to rely on the fact that the price will definitely reverse after hitting either band lines though.
You can use other confirmatory methods such as bullish candlestick patterns before a buy or bearish ones before a sell.
Lastly, on this point, you might be asking when the best time to trade these kinds of setups is.
Markets usually range before the release of critical economic data.
Therefore, if you are well verse with the release of economic news, make sure to look for ranging markets before such releases and make use of the Bollinger bands tool to trade the range.
Trading Breakouts with the Bollinger Bands.
In this case, it is a combination of Bollinger bands and what price bars are doing which will confirm that it is indeed a breakout that the market is up to.
So how do you establish a breakout using the Bollinger bands technical indicator? It is simple.
Once price bars begin to push against the upper band line and not reversing downwards but continuing upwards, then such will most probably be an upward breakout.
On the contrary, if price bars begin to push against the lower band line and do not seem to reverse but continue downwards, then such will definitely be a downward breakout.
Scenarios like these will definitely be accompanied by an expansion or widening of the Bollinger band indicator bandwidth.
What else do you expect when the price is pushing against either the upper or lower band line sustainably in one direction?
What else, if not an expansion of the bandwidth which had been narrow?
It will exactly be so, as the standard deviation of the upper or lower band line from the middle line increases due to an increase in volatility upwards or downwards.
Before you can jump to conclusions though, first be sure that candlesticks pushing against the upper and lower band lines close beyond such lines.
That is to mean that for a successful upward breakout, candlesticks pushing against the upper band line must close above such a line.
However, for a successful downward breakout, candlesticks pushing against the lower band line must close below such a line.
Trading the Breakout with Bollinger Bands.
So how do you trade such breakouts shown by the Bollinger bands tool?
It is very simple because you know that upward breakouts are a bullish signal while downward breakouts are a bearish signal.
Buy when the price breaks above the upper band line and continues upwards and sell when the price breaks below the lower band line and continues downwards.
For the buy position, you must wait for a candlestick to close above the upper band line and a candlestick to close below the lower band line for the sell position.
Is it not also useful to confirm the breakout with other setups?
It indeed is, and so you can still confirm using bullish candlestick patterns before a buy and bearish patterns before a sell.
Double Top and Double Bottom with Bollinger Bands Trading.
This strategy couples Bollinger Band price ranges with the double top or double bottom chart pattern to pick high probability entries.
Only the Bollinger Band indicator and price action are applied in this strategy.
The first step is identifying the double bottom or double top.
The double bottom is a bullish reversal chart pattern resembling the letter ‘W’.
On the other hand, the double top is a bearish reversal chart pattern resembling the letter ‘M’.
Double Bottom (‘W’).
Let us begin by how you can identify the double bottom:
- First, the price must form a reaction low which is usually but not always below the lower Bollinger band.
- Second, the price must then bounce upwards towards the central moving average, then falls again, forming a new low which must hold above the lower Bollinger band. That such new low holds above the lower Bollinger band shows less weakness on the last price drop.
- Lastly, the pattern is confirmed by a strong upward move off the second low and a break above a resistance level created by the middle pivot point of the ‘W’ pattern.
Double Top (‘M’).
Next, let us see how to identify the double top:
- First, the price must form a reaction high which is usually but not always above the upper Bollinger band.
- Second, the price must then bounce downwards towards the central moving average, then rises again, forming a new high which must remain below the upper Bollinger band. That such new high remains below the lower Bollinger band shows less strength on the last price rise.
- Lastly, the pattern is confirmed by a strong downward move off the second high and a break below a support level created by the middle pivot point of the ‘M’ pattern.
After such chart patterns have formed in respect to the Bollinger Bands, the next thing is entering buy or sell positions.
Enter a buy order when the price closes above the level of the middle pivot of the ‘W’ or double bottom pattern.
On the other hand, enter a sell order once the price closes below the level of the middle pivot of the ‘M’ or double top pattern.
Trading Outlier Bars with the Bollinger Bands.
Under normal circumstances, the price should remain contained within the confines of the Bollinger band’s envelop.
If it has to move outside the envelope of the Bollinger bands tool, then at least not an entire price bar, but just part of a price bar which must have the other part contained within the Bollinger band’s bandwidth.
So, knowing what you know, what do you make of a scenario where a whole bar is entirely outside the confines of the Bollinger band’s bandwidth?
Such a bar is what we call an outlier bar.
That is to mean that an outlier bar is a candlestick whose whole dimension lies outside the Bollinger bands tool, either above the upper band line or below the lower band line.
Then what significance is attached to outlier bars?
Basically, prices cannot stay beyond the Bollinger bands for long.
That means if an outlier bar forms above the upper band line, then it is expected that the price will soon fall back to the bandwidth of the Bollinger bands indicator.
On the other hand, if an outlier bar forms below the lower band line, it is expected that the price will soon rise back into the bandwidth of the Bollinger bands indicator.
Trading the Outlier Bar with Bollinger Bands.
What then, do we do with the above information?
If you are fond of trading price reversals, you should rejoice every time an outlier bar comes up.
That is because it spells a looming reversal in the direction opposite where it forms on the Bollinger bands indicator.
It is a bullish reversal setup when an outlier bar forms below the lower band line.
However, it is a bearish reversal setup when an outlier bar forms above the upper band line.
Therefore, buy when an outlier bar has formed below the Bollinger band indicator.
On the other hand, sell when an outlier bar has formed above the Bollinger band tool.
Do you need a confirmation before entry?
As with any other reversal setup, you need to obtain other supporting signals before any entry.
Never give so much attention and weight to a setup in isolation. Bullish and bearish candlestick patterns are good confirmatory tools to use for this setup.
Trading the Gimmee Bar with the Bollinger Bands.
The Gimmee Bar Strategy involves using Bollinger Bands with price action to trade price ranges.
The price ranges during low volatility and therefore, this strategy works best during moments of reduced market volatility.
Choosing the Market to Trade.
The first step is choosing the market to trade. The market to trade with this strategy is one that is in low volatility and range.
Observe the price to see which markets seem to reverse almost every time the price hits either the upper or the lower Bollinger Band.
You can consider looking for less volatile markets on currency pairs whose trading sessions have closed.
Establishing a Trading Range.
The next step involves establishing a trading range.
Do so by observing price action in relation to the Bollinger Bands indicator.
A trading range occurs where the price touches the upper or lower Bollinger Band but reverses towards the central Moving Average, instead of breaking out of the bandwidth of the indicator.
The price must therefore tag the upper and lower Bollinger bands several times without breaking out to resort to a trading range.
Identifying the Gimmee Bar.
The next thing to do in this strategy is identifying the Gimmee bar.
A bullish Gimmee bar occurs when the price, after falling to touch the lower Bollinger Band, forms a bullish candlestick.
A bearish Gimmee bar, on the other hand, occurs when the price, after rising to touch the upper Bollinger Band, forms a bearish candlestick.
Note that you must avoid Gimmee bars that overlap with or are close to the Bollinger Band central Moving Average, have a wide range, or are followed by a trading gap.
Last is the actual setting up of buy or sell orders. Enter a buy order 1 pip above the high of the valid bullish Gimmee bar.
On the contrary, enter a sell order 1 pip below the low of the valid bearish Gimmee bar.
The ‘MACD-Bollinger Band’ Trading Strategy.
This strategy makes use of the Bollinger Band and the Moving Average Convergence and Divergence (MACD) indicators to pick trade entries.
MACD is used to establish the market trend while Bollinger Bands are used as a trade trigger.
Setting Up the Indicators.
The first step of this strategy is setting up the indicators. Click on the indicators tab and choose MACD.
Adjust the fast MACD moving average to 12, the slow MACD moving average to 26, and the MACD signal line to 9, and then apply the indicator.
Click on the indicators’’ tab again and choose Bollinger Bands. Adjust the Bollinger Band Moving Average to 12 and the Standard deviations for the bands to 2 and then apply the indicator.
Establishing a Price Consolidation.
The second step involves establishing a price consolidation or congestion.
This strategy is a breakout strategy and breakouts occur after price congestion.
Therefore, establish a zone of price congestion by having the price slow down the bull or bear move by ranging or forming neutral candlestick patterns.
Spotting the Signal.
The third step is the identification of trading signals.
A bullish trading signal is identified where the MACD moving averages are above both the MACD signal line and the zero line.
A bearish trading signal, on the other hand, is identified where the MACD moving averages are below both the MACD signal line and the zero line.
Confirming the Signal.
After obtaining the MACD signal, it requires confirmation by the Bollinger Bands indicator.
Confirm the bullish MACD signal with a bullish breakout of the price above the upper band of the Bollinger Bands indicator.
On the other hand, confirm a bearish MACD signal with a bearish breakout of the price below the lower band of the Bollinger Bands indicator.
The price must close above the upper Bollinger band for the bullish breakout to be valid and below the lower Bollinger band for the bearish breakout to be valid.
The fourth step of the strategy involves setting up buy or sell orders.
Enter a buy order once the price breaks above the upper Bollinger Band, after obtaining a bullish MACD signal as specified above.
On the flip side, enter a sell order once the price breaks below the lower Bollinger Band, after obtaining a bearish MACD signal as specified.
Wrapping Up on How to Use Bollinger Bands to Win in Expert Option.
How would you like to use the Bollinger Bands indicator to win in Expert Option?
Don’t you have more than enough techniques you can employ the Bollinger Bands indicator in your trading in Expert Option now?
Indeed you do, and so pick whichever technique suits you best and go make money trading in Expert Option with it.