Trading with Bollinger Bands is another good stratergy to use, especially when used with the RSI and MACD. This stratergy can be used with any time frame, my preferences are one minute, five minute and fifteen minute time frames.
Bollinger Bands are a technical indicator that can help you evaluate whether the current market price of an asset is high or low and how far the asset’s price can move.Bollinger Bands consist of a moving averge, most commonly a simple 20-period moving average. In the picture above the moving average is the middle line, the line on top is the upper band and the line on the bootm is the lower band, creating a channel for the price movement of the asset. In the second screen below the main chart you can see the RSI set at 70 and 30 and also the MACD. ( Screen shot of Meta trader 4 from my phone ).
In the picture above, to the far left we can see the bullish candle ( coloured green ) has broken through the upper band and the MACD lines in the graph below (coloured pink ) are closing above the 70 RSI line, meaning the asset has been over bought, so at the close of that green candle and this being a one minute chart, I would take a one minute PUT option and as you can see the next candle was bullish ( coloured red ) so that is a winning trade. I will only place a PUT trade when the bullish candle has broken through the upper band and the MACD is closing above the 70 RSI line.
The next candle we see break through is a bearish candle breaking through the lower band and the MACD is closing under the 30 RSI line, meaning the asset has been over sold, so at the close of that candle I would place CALL option for one minute. and again as you can see the next candle was bearish so this too was a winning trade. Immediately following this another bearish candle breaks through the lower band and the MACD closed lower the the 30 RSI again so this would be another CALL trade for one minute, and again another win. I will only place a CALL trade when the bearish candle has broken through the lower band and the MACD is closing below the 30 RSI line.
The next break through’s we see I would not trade because the MACD is closing in what I call no mans land, the area between the 30 and 70 RSI lines. So these are basically my rules for trading, using Bollinger Bands. There are alot of different stratergies using Bollinger Bands but I use this one and as you can see as long as you keep to the basic rules you should do well and improve your winning percentages.
A usual always try this out on your Demo Account before trading live with your hard earned money. Happy Trading. Please feel free to check out my face book page ” JTC Trading “, leave comments etc. and let me know how you are going with your trading.