Bollinger indicator is a popular tool among traders today. Working with this algorithm is quite simple, but the received signals are strong enough. It is for this reason the binary option strategy Volatility Expansion by Bollinger, like many other systems today, is often used in the traders’ work and is enjoyed great success.
Bollinger indicator consists of several moving averages, which together form a kind of bands in the binary options graph. If you examine the graph, you can see that the curves of the indicator will always follow the price. Moreover, the price itself is clamped between the borders of Bollinger indicator.
From time to time the price repels from one of the indicator’s boundaries and moves in the opposite direction. At this point, a trader can trade on the indicator. However, an indication of the market volatility expanding is the expansion of the Bollinger Bands. That is what makes it possible for the emergence of such a binary option strategy as the expansion of volatility by Bollinger.
Let’s take a closer look at the graph. Bollinger bands really embody the price wherever it moves. It is also possible to clearly see on the graph the moments when the bands contract and after a while increase again. It is these moments are important for us when using this strategy. At such moments the trader can prepare to open a deal. However, it is not recommended to enter the market and purchase the contracts at the time of the divergence.
As we noted above, in order to make this strategy work, you must wait until the indicator, that is, the bands, will first narrow and then disperse in different directions. This moment interests the trader the most.
The divergence of the bands in different directions suggests that the market volatility is expanding and there is a possibility to buy binary options. If at the time of Bollinger bands’ expansion the price starts upward movement, you can buy a Call option, as the expansion in this case suggests that the market trend is emerging.
The same applies to the situation where the expansion of the Bollinger bands is accompanied by a downward movement. In this case, the trader is recommended to buy a Put option. In fact, the binary option strategy of Volatility Expansion by Bollinger is flawless, as a trading signal can be seen even by a novice and thus he can start making money on the binary options market. However, there are a couple of nuances that I would like to clarify.
This trading system can sometimes give false signals, i.e. volatility begins to expand together with Bollinger bands. However, it soon turns out that the bands narrow again showing the constriction of volatility. Therefore, in this strategy can be used even an extra indicator that would act as a filter. For this any oscillator is perfect, including the Relative Strength Index.
Thus, the binary option strategy Volatility Expansion by Bollinger is a very simple and interesting trading system which can be used in work even by those who only recently started to get acquainted with the financial markets. However, from time to time in the work of this indicator may appear false signals.
That’s all for now. Got any questions? Just ask the expert!