Bollinger Bands and RSI
- VFX Blog
Posted by bynaryost at Nov 4, 2017
Indicators and signals of binary options are very popular among novice traders in their deceptive simplicity: Traders think they do not need to study the market and the theory. They just open the position when they see an arrow up or down and think that is all they need. In most cases, this only leads to a quick loss of the deposit and all beginners should understand that they can't trade without thinking, analyzing the market and understanding what is the forex market is. Only that trades who have a trading strategy can win on the binary options market.
Characteristics of the strategy
- Type: scalping;
- Charts period: 30 second - 60 seconds;
- Currency pairs: any with high intraday volatility;
- Trading period: the whole trading day Forex
How to trade
Adjust indicators in your trading system:
Bolinger Bands (BB)
Period = 40
Standard deviation = 2
Relative Strength Index (RSI)
- Period = 6
- CALL - when you see price goes up from lower BB line and RSI also goes up from level 20
- PUT - when you see price goes down from higher BB line and RSI also goes down from level 80
The vfxalert signal of an Adaptive (M1 or M5) algorithm should be the same direction as a signal of the current strategy.
Not less than 3-5 candles of working chart period. If your chart period is 30 seconds that is mean expiration time should be 90-150 seconds.
How to open the position
You should open position when all conditions are met on the first new candle is opening! If you miss the moment of the first candle opening wait next signals.
Some bits of advice
- The strategy works very well when the trend of M15 or M30 is Flat.
- For turbo-options, it is highly not recommended to use Martingale or doubling the next transaction to compensate for the losses of the previous one. At small timeframes, mostly "market noise" is traded, trends last no more than 3-5 candles and it is better to wait for a strong signal on the strategy. You can vary the amount of the option depending on the strength of the vfxAlert signal, as shown in the video;
- The impact on the market of significant fundamental news and statistics can't be predicted from technical strategies and it is better to refrain from trading during these periods, especially for beginners. Experienced traders can use strong signals from indicators and vfxAlert before the news release as leading, but you can not rely entirely on them.
Relative Strength Index
The indicator RSI is an oscillator, and therefore it oscillates in a certain zone, limited by the maximum and minimum values. The index of Relative Strength is set on a scale from 0 to 100. It works best, reaching areas of extremes. The criterion for evaluation is two lines drawn at the level of 30 and 70. It is believed that the overbought zone is above 70, and below 30 is oversold. Therefore, when the value of the Relative Strength Index reaches and rises above 70, there is a threat of a drop in prices; movement below 30 is perceived as a warning of a near rise. Some analysts advise to accept 30 and 70 levels as boundaries only with side trends, and 20 and 80 with clearly expressed bullish and bearish.
Of course, exceeding levels 30 and 70 does not mean that you need to immediately begin making deals. After all, the market may be in a state of overbought and oversold for a long time, and the oscillator, warning about a change in the trend in advance, does not explain when exactly this can happen.
How to choose the optimal period? The fact is that for different timeframes of the same currency pair, it will be different, so it will not be possible to use once successfully selected indicator period on all time scales of the pair you need. As a rule, the smaller the timeframe, the longer the period should be and vice versa. It is not difficult to find the optimal period for the RSI indicator — you need to consistently look through the periods and look at the overbought and oversold zones. As soon as the main highlights (reversal, key) highs and lows on the price chart begin to be reflected by the indicator in the overbought and oversold zones, and the rest will be (at least most of them) outside these zones, consider that the optimal period is found.
Many traders do not like classical indicators and even indicators in principle. I believe that they simply do not know how to cook them.