- a classic trend indicator, which is used to determine the location of the price relative to its standard trading range. Unlike other instruments based on similar principles, it can measure not only the direction of price movement, but also its speed.

Bollinger Bands indicator description

On the indicator chart, we see a channel with a normal trading range between its borders. Most of the time (≈95%) the price moves within these limits. A channel is built on the basis of a simple moving average, up and down from which the other two are equidistant Moving Average... Distance from the center band is proportional to the standard deviation Standard deviation... Depending on whether this indicator decreases or increases, the channel boundaries narrow or widen. Accordingly, volatility decreases or increases.

Bollinger Bands is included in the basic package of all well-known trading platforms.

To work, the user will need to set the period of the middle line, the deviation value and the type of price, according to which the curve will be plotted (close, average, open, etc.). Thus, we get:

• middle stripe- SMA (period 20);
• top band- SMA plus Standard Deviation (2);
• bottom band- SMA minus Standard Deviation (2).

The default settings are not dogmatic.

D. Bollinger believes that the optimal period for the middle band is 10 for short timeframes, and 50 for long timeframes.

The smaller this parameter, the more signals are generated. Increasing the period limits the number of messages, but at the same time, significantly improves their quality. If there is a desire to reduce the standard deviation of 2, it should be borne in mind that although a narrow channel breaks out more often, many of these breakouts generate false signals.

Video - Bollinger Bands

Bollinger Bands Indicator Signals

The creator of Bollinger Bands identifies the following indicator patterns:

• If the price starts moving from one of the boundaries, it will most likely reach the opposite one.
• The narrowing of the band is usually accompanied by sharp price fluctuations. The likelihood of a breakout increases.
• If the price has broken the boundary line and moves further, we can talk about the continuation of the trend.
• Outside the bands cannot last longer than four bars. It is recommended to open against the trend right after the formation of the fourth candlestick. However, practice shows that exceptions are not so rare here.
• If the high / low formed outside the bands is replaced by a similar extreme inside the channel, there is a high probability that the trend will change soon.

Bollinger Bands is a trend indicator that displays the state of the market at a particular moment.

For example, if the Stripes, with a not too large slope, move in parallel for a long period, it means that the flat state reigns. As soon as this situation begins to change, it is worth preparing for the emergence of a powerful trend.

Bollinger Bands entry points

Formation of trading signals is not the main task of the tool, but you can get some useful messages.

The opportunity to open a position appears every time the price curve breaks the central moving average. If the intersection took place from below, a deal is created on purchase if from above - for sale.

The next tactic involves opening a position against trend... It is used when the price within the channel reaches one of the boundary lines. After the breakout, it is assumed that a powerful reverse movement will begin. When the bottom line is broken, a buy trade is opened, and when the upper line is crossed, a sell trade is opened. Many traders are skeptical about this signal, rightly pointing out that the price can “latch on” to the band and accompany it long enough to bring a serious negative.

One of the most popular ways to exploit the Bands is to use their borders as resistance / support levels. According to the classic rule, the price moves outside the channel only 5% of the time. For the rest of the period, she dwells inside. Above is the resistance level, the approach to which indicates the need sell... If the price moves close to the lower support level, you should buy... The best results are achieved during the flat period.

From time to time, patterns are formed on the indicator chart, the appearance of which can also be a trading signal.

Model "M" ("double top")

occurs when the following conditions are met. First, the price breaks out or touches the upper line, reverses and moves towards the center line. Further, it repels from the middle and forms a new maximum, which should not touch the border. The next crossing of the middle band will be a sell signal.

Pattern "W" ("double bottom")

arises according to a similar pattern: the price breaks out the lower moving average or touches it - moves to the middle and turns around there - a new minimum is set that has not reached the border. After crossing the center, a sell signal appears.

An example of our trade in Bollinger Bands

The price line touched the lower border of the indicator, before that the price immediately bounced off it, which means that the rate will move up:

We decided to open a deal on options, since here the profit is always fixed and does not depend on the level of price change. We chose GBP / JPY, indicated the end time of the transaction at 10:25 (in 18 minutes), and indicated our growth forecast - UP:

If after 18 minutes, when the option is closed, the GBP / JPY quote turns out to be higher than at the time of purchase, and it does not matter by how much, then we will receive 73% of the profit from the amount invested in the option.

Bollinger Bands- a sufficiently accurate indicator, and look at the chart a second before the option is closed.

Bollinger Bands Strategy is considered one of the most popular for investing in binary options. It is easy to use and very effective. With its help, you can identify clearly defined prerequisites for buying an option. ABOVE or BELOW.

Bollinger Bands are a universal volatility indicator that can single-handedly replace several technical analysis tools. It is the versatility of Bollinger Bands that made it one of the most popular auxiliary tools among traders specializing in binary options.

The Bollinger Bands strategy shows the change in the price range and the rate of price change. You can find this indicator on by clicking on the button Indicators — Bollinger Bands.

Essentially, it is oscillator, on the chart of which the user sees three lines. The central axis is formed by a simple moving average. The other two are equidistant from this line. SMA which formthe boundaries of the price corridor. If the price goes beyond these limits, it is considered a powerful trading signal. The wider the corridor, the higher the market volatility. When the price behaves as calmly as possible, the bands narrow.

Notations and terms that you can meet in this strategy:

• Resistance line(Resistance) is the upper straight line connecting the maximum values ​​of two or more vertices.
• Support line(Support) is the lower straight line connecting the highs of two or more troughs.
• The corridor(trend channel or Channel) - the width of the space between the resistance line and the support line.
• Upper sliding line (Bollinger Bands) - a resistance level showing a high price, which should soon begin to decline. After setting the highest price, they start investing in put options.
• Lower sliding line (Bollinger Bands) - support level (Support), showing a low price. After setting the lowest price, they start investing in call options.
• Moving average the line is an indicator (Stochastic Oscillator). It has 20 cyclical periods, that is, the indicator shows the time period for the last 20 days.
• Volatility- variable width of the corridor, which reflects the change in prices over time.

Here is a typical chart with the Bollinger Bands indicator:

The chart shows that prices move within the corridor between the resistance line and the support line. The indicator is determined by the parameters of the central moving line and two side lines.

Side lines show volatility, that is, the spread of prices. The wider the corridor, the higher the range of prices.

When to buy a binary option

There are three main options for using this indicator when:

• reaction to signals associated with a strong breakout of one of the corridor boundaries;
• studying the price behavior at the moments when it is in uncertainty about the exit from the channel;
• analysis of the patterns formed on the price chart.

Breaking the lines

Most of the time, the price moves within the established channel. Preparation for trading begins from the moment it approaches one of the boundaries. If the price crosses the lower line, then it is highly likely that it will soon begin to rise. Based on this assumption, you can purchase an option with growth forecast... If the upper line is broken, we should expect the price to decline. It's time to buy the option PUT (DOWN - forecast of a fall in the rate).

This tactic can only be used if there is no pronounced powerful trend in the market. If there is such a trend, the transition of the line will be its additional confirmation. This will be discussed below. Whathow to determine whether the price movement will change or the trend will continue? To solve this problem, you can use additional technical analysis tools. However, you can get by with the readings of the Bollinger Bands.

"Watch" at the border

A situation when the price briefly goes beyond the border of the corridor or touches it, bounces slightly and again moves in the same direction, can be called a “walk along the strip”. Such a short-term violation of the border indicates that the trend vector will not change soon.

If several such crossovers / touches have already occurred, then each new one becomes an ideal moment to buy an option. In case of contact with the upper line, it is acquired CALL, with a lower boundary - PUT... It is better to open a deal at a time when the price bounces back a little.

Shapes

But how to determine that the price after crossing will not continue to move in the same direction, but will go in the opposite direction? Reversal moments can be helped by W-shaped and M-shaped patterns that form on the price chart.

Bollinger himself identifies about fifty such patterns, but the principle of operation of all of them is approximately the same.

Let's start with W-shaped figures. They form at the bottom of the corridor. As a rule, the first part of the pattern is higher than the second, but this is not required.

The figure is formed as follows. The price goes down and touches ( crosses over) of the boundary line, after which it rises above the average SMA... Then it goes down again, but no longer reaching the lower limit. The next rise indicates the emergence of a powerful uptrend. It is safe to say that a new trend has begun after the price curve exceeds the level it reached at the midpoint of the pattern. At this moment, you can open a deal to buy an option CALL.

The situation is similar with M-shaped figures. They are formed in the same way as W-shaped.

After breaking the upper border, the price drops below the center line. Then it grows again, but does not reach the limit and again begins to decline. As soon as it crosses the level of the middle point of the pattern, one can state the beginning of a downtrend and purchase an option PUT.

An example of trading using the Bollinger Bands strategy

A signal to break the line appeared on the chart, the second candlestick went up after the break:

It's a good time to open a trade with a growth condition:

FiNMAX.

Conclusion

This strategy is considered effective on five and fifteen minute timeframes.

It can also be used when trading options with one minute expiration, but it is recommended to check the readings on longer time frames. That is, it is better to compare the indicator data on a 1-minute timeframe with the results of charts for 15 and 30 minutes. By the way, this advice is also relevant for other tools used when working with binary options.

The Bollinger Bands strategy is a universal indicator, the presence of which significantly increases the chances of success. Naturally, provided that the trader uses the technical analysis capabilities wisely. In addition, you should always remember about the rule of money management: do not invest more than 2% of the deposit in a deal.

The main signals for the Bollinger Bands strategy

• If the price begins to change, it will tend to reach the border of the opposite line.
• If, after the rise and fall of prices outside the corridor, similar ups and downs follow inside the corridor, then the trend will reverse soon.
• When the corridor narrows in a manner similar to a decrease in volatility, prices will move sharply.
• If 3-4 tops or bottoms (bars, peaks) go beyond the corridor line in a row, then prices will then roll back.

There are many strategies based on the universal Bollinger Bands. In this article, we will look at one of the most effective strategies, the “Inside Day with Bollinger Bands”. The strategy is intended for those traders who prefer to trade with the trend and want accurate and unmistakable trend reversals.
Trading with the trend is much more difficult in practice than while studying the theory, so a trader needs to learn how to accurately determine the minimum and minimum and use an effective filter that contributes to the successful establishment of trades at the bottom and top.

Three Bollinger Bands Strategy - Conceptual Basis

The essence of the strategy is based on reaching a stable level of resistance or support, there is a considerable likelihood of a reversal in the opposite direction. However, if you just sell assets at resistance and buy them at support, you will not be able to catch reversals often and this will most likely lead to losses.

Another problem is the inability to sufficiently formalize the process of identifying levels, which makes such trading dependent on subjective arguments. Therefore, the main trading tool will be the determination of levels using Bollinger Bands. As a result, the strategy also involves opening positions based on the "inside bar" pattern.

First of all, it is necessary to define what the “inner Bollinger day” is. Let's remember that the price movement above the middle line in the Bollinger Bands (BB) is a signal that the currency is overbought, so the price should decline towards the “golden mean”, that is, the BB center line. The fall in price below the central BB line, on the contrary, is a signal that the currency is oversold.

However, if the price touches the lower or upper BB line does not signal that a position should be opened, since a strong trend is capable of both "moving" the price beyond the BB band and keeping it near the outer indicator line for a rather long time.

The task is to identify those signals at which a new candle is formed.

At the same time, the candlestick should not reach the minimum or maximum values ​​of the previous candlestick, which touched the outer line of the BB indicator. These candles are just called as "+ inner + day candles".

The best method to apply Bollinger Bands. Indicator strategy

About time intervals of the Bollinger Bands strategy

A more promising time interval for searching for “candles on the inside day” is undoubtedly the daily chart (graphically D1). But this strategy based on Bollinger bands implies the possibility of trading on monthly, weekly, and hourly charts.

Everyone understands that with an increase in the interval, signals for entering the market will appear less often, but these signals are of great importance, therefore, the potential profit will be greater. We can say that to predict a trend reversal, the moment of less volatility in the market and price movement from the external BB border to the center line will actually be used.

There is no need to try to look for signals to enter at a turning point: - when the channel between the indicator bands narrows.

The channel should be wide enough, and the stripes themselves should be parallel to each other. This will indicate an average degree of price volatility.

Bollinger Bands Strategy Forex Trading Recommendations

In some cases, trade exits can be improved by closing the profit on the current open trade on the opposite of the Bollinger Bands. When closing deals at more suitable prices, you should trade 2 lots and take profit from half of them, or one on the opposite BB line from the opening. Stop Loss of the 2nd lot should be rearranged by the 20-period SMA. This will allow you to close trades at reasonable prices and, in addition, be able to take a good trend.

Bollinger Bands in inside day trading can be used to spot significant reversals on your weekly / monthly charts (for long term trading).

This strategy has many advantages. The most obvious of these is its simplicity. A trader within the framework of this strategy is easily able to measure his own risk for any transaction and set the corresponding Stop Loss.
All conditions of the strategy are dynamic, which allows you to trade using any time intervals, including the hourly chart in intraday trading. However, it should be borne in mind that the longer the time frame, the more accurate the trading signal will be.

Bollinger Bands Strategy

Bollinger Bands- indicator based on moving averages, showing the standard deviation. It draws a “normal” price level corridor on the chart, consisting of two extreme lines and one middle line. The most powerful signal is candlesticks going beyond the upper or lower border of the band. The moment the price overcomes the middle of the channel is also taken into account. The indicator is a basic tool for technical analysis. This article is devoted to an overview of the simplest Bollinger Wave strategy, and will tell you in detail how to use Bollinger Bands.

Briefly about the developer

Bollinger Bands named after its creator - John Bollinger. Like many other world famous traders, John got to know the exchange by chance, and he is a lighting operator by profession. After getting a position at the Financial News TV channel, he came to grips with studying the working methods of financial analysts. It took 7 years to develop the indicator, the finished version was presented in 1991. After just 5 years, Bollinger was officially recognized as the best stock trading software developer.

How to use the Bollinger Bands indicator

Bollinger Bands are composed of three lines. The middle is a classic Moving Average... The top and bottom are moving averages, but with an offset by a certain number of standard deviations, which is specified in the settings. The default settings for the duration are 20, the deviation is 2. These parameters are recommended to be used by John himself, the developer of the algorithm. The indicator emits signals of several types:

1. The price breaks through the channel border. Signals of a pronounced trend in the direction of the breakout, but the imminent onset of a correction period. On average, no more than 5% of all candles break through the wave boundaries.
2. Approaching the upper or lower border. As a rule, having come close to the border, the price rolls back to the level of the middle moving average, or the lower border.
3. Crossing the middle line. It foreshadows the price movement in the direction of the breakout at a distance to the wave border.

So let's figure out how to use Bollinger Bands... In the example above, there are several consecutive breakouts of the upper border of the band. This suggests that a strong uptrend is active in the market. Almost every breakout is followed by a short-term price pullback, but the direction of the main trend does not change. Based on this, we can conclude that after the candle leaves the channel, you can open a deal in the direction of the trend with an expiration of 10-30 candles. Turbo options are not suitable in this case.

Trading strategy rules

On short-term time frames, you can successfully make a profit on short-term price corrections. Their occurrence is signaled by the closing of the candle below the middle line. If this happens, then you should buy an option for a period of 2-4 candles. During this time, the price manages to reach the border of the corridor.

The signal is considered valid only if if the price has previously reached the edge of the wave... The shadow of the candlestick is not taken into account.

A practical example of trading Bollinger Bands

Indicator Bollinger Bands shows higher accuracy if used on timeframes 1–5 minutes. In this case, an interval of 60 seconds was selected. The price approached the upper border of the wave, after which it hastily rebounded in the opposite direction and approached the signal line. You need to prepare to open a deal.

The market was entered immediately after the candle closes below the moving average. The expiry date is 4 candles. According to the forecast, during this time the price should reach the lower border of the wave.

The expectations did not come true in full - the price did not reach the lower line in 4 minutes. However, this did not prevent them from making a profit on the deal. Soon the price crossed the middle line again, but it was impossible to buy the Up option in this situation, because there was no touch with the lower border.

Considered signal trading strategy Bollinger Bands has very simple rules, so it is ideal for beginners. At first glance, the indicator is quite primitive. However, in fact, in the hands of an experienced trader, this tool allows you to make highly accurate forecasts. It's all about the shape and size of the waves.

Useful video about the indicator

Download Bollinger Bands indicator

With the accumulation of practical experience in trading and observing the behavior of the indicator, the skill of intuitive perception of hidden signals is acquired. This allows the trader to filter valid points for entering the market from false ones. For this purpose, Bollinger Bands are better suited than other indicators built into.

Download the Bollinger Bands indicator for testing and gaining practical experience for free from our website, as well as convenient instructions for installing and configuring.

Automation of an interesting trading strategy that allows scalping based on traditional indicators of any trading platform, we will automate and test the site in the 72nd issue of the magazine. You can find the full copyright rules of the strategy at, here we will briefly tell you about the rules and results.

Copyright rules of a trading strategy

So, to work we need the following indicators:

— Bollinger Bands with a period of 50 and a deviation of 2 (yellow color);
— Bollinger Bands with a period of 50 and a deviation of 3 (blue);
— Bollinger Bands with a period of 50 and a deviation of 4 (color red);
— RSI indicator (8) with levels 30 and 70;
—Stochastic (14, 3, 3) with levels 20 and 80;
— MA (50)- central red line.

Because Our strategy is scalping, then the timeframes used will naturally be the lowest: М1 and М5.

A buy signal arises when price breaks down the yellow channel and travels at least half the distance to the lower blue Bollinger band. The price presumably rolls back to the MA red line (50), where we take profit. An additional signal is when the RSI indicator reaches the level of 30 and below, while the Stochastic indicator is less than 20.

Sell ​​signal is formed under the opposite conditions: the price breaks up the yellow channel and travels at least half the distance to the upper blue Bollinger band. We fix the profit when the moving average is reached. An additional signal is when the RSI indicator reaches the level of 70 and above, while the Stochastic indicator is greater than 80.

The process of closing a deal according to the strategy remains with the trader; he can use his own developments in this matter.

Automation of a trading strategy

In the process of automating the trading strategy, the programmers of the magazine have somewhat expanded the principles of opening and closing positions. Including in the Expert Advisor, you can find the parameter enter (market entry) which has five meanings:

— 0 - a trade is opened between the yellow and blue BB lines;
— 1 - between blue and red;
— 2 - entrance when touching the yellow line;
— 3 - entrance when touching the blue line;
— 4 - entrance when touching the red line.

Indeed, Forex instruments differ so much in the nature of the movement of quotes that such an addition will be very useful in work.

In addition, we have fully defined the rules for exiting a trade by offering 6 options (parameter close_type):

— 0 - closing on the middle line;
— 1 - closing a deal between the yellow and blue lines of the reverse side of the channels;
— 2 - closing a deal between the blue and red lines;
— 3 - closing when touching the yellow line;
— 4 - closing when touching the blue line;
— 5 - closing when touching the red line.

Now there is an opportunity not to lose profit on more volatile instruments.

Remaining expert parameters

— bolinger_per- period of Bollinger indicator lines: from 10 to 200 and more.
— bolinger_deviation_yellow- the deviation parameter for the yellow Bollinger lines, the rest are calculated automatically. A value from 1 to 4.

— RSIFilter- enabling and disabling the filter via RSI: 0 - disabled, 1 - enabled.
— rsi_period- period of the RSI indicator.
— rsi_ur- the upper RSI level, the lower one is calculated automatically: from 95 to 55.

— StohasticFilter- enabling and disabling the Stochastic filter: 0 - disabled, 1 - enabled.
— stohastic_period Is the stochastic period.
— stohastic_ur- the upper level of the stochastic, the lower one is calculated automatically: from 95 to 55.

— InpTakeProfit- take profit, 0 - not used.
— InpStopLoss- stop loss, 0 - not used.

Testing a trading strategy

Nevertheless, the optimization of the EA parameters turned out to be quite successful. For the 5-minute timeframe, the EURUSD and USDJPY pair also yielded results, which is surprising, given the different nature of these instruments.

In the period from August 31 to February 26, a profit of $ 1573.60 was made from a $ 300 deposit. At the same time, the maximum drawdown was 20.41%, and the average winning trade ($ 91.17) exceeds the average losing trade (-70.56 $). Back tests also gave excellent results.

In the period from September 7 to February 26, a profit of $ 1801.49 was made from a $ 300 deposit. At the same time, the maximum drawdown was 13.28 %%, and the average winning trade ($ 61.46) exceeds the average losing trade (-41.10 $). Back tests also gave excellent results.

1. Fixed minor bugs in the strategy algorithm
2. Time limitation added.
3. Added two buy and sell parameters for separate optimization of buy and sell trades: 1-on, 0-off.

We invite you to get acquainted with testing the advisor on a demo and a real account for the dollar / yen currency pair. The Expert Advisor was placed on a demo account immediately after the publication of the website magazine in order to test its behavior in real trading conditions.