Binary options divergence strategy with bollinger bands For MT4
Table Of Contents:
- Binary options divergence strategy with bollinger bands For MT4
- Call option setup
- Put option setup
- Retracement levels
- Managing the risk
Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.
The Binary options divergence strategy with bollinger bands For MT4 is a perfectly designed options trading method for the rookies. Having a fair knowledge about the divergence factor is very hard. People fail to assimilate highs and lows of indicators and price. This usually results in catastrophic disasters. But with this method, you will be able to focus on the trade setup even without knowing the divergence pattern. For finding the retracement, we will be using the XIT Fib indicator. So, taking trades at the endpoint of any retracement is not going to be tough. Let’s dive into the details and learn to execute quality trades without this options trading method.
Call option setup
For the long trade, you need the slope of the Bollinger band pointing north. It suggests the overall trend is up and you are not placing trades against the trend. Wait for a strong bounce at the Bollinger band support. The price should have a closing above the dynamic support band (Bollinger band support level).In the indicator panel, you will notice red histogram bars trading near the -28 level. Note the black color signal line must have a downward slope to consider it as a valid long trade. Chose the D1 chart to analyze the trend. Doubting the trend direction in the D1 chart is a strong indication not to take the trade.
Put option setup
When you anticipate the price will go down, you need to go for the put option. The price position will be at the Bollinger band resistance. The slope of the BB will be pointing south. The testing candle should have a closing well below the Bollinger band resistance. You will spot a blue histogram near the 28 levels in the indicator panel. Go for the put option when the conditions are filled. Analyze the potential drop in pips as it can help you to validate the expiry period. In general the higher time frame gives you a bigger price movement. So, you can expect to have a greater drop when the analytical data is taken from the H1 or above time frame.
Retracement levels
Those who are looking for precise entry must examine the retracement level. As these levels are drawn automatically, highs and lows are not going to bother you. The coherence of the Bollinger band levels with the fibo level is a great way to reinforce your trading idea. This tool also helps you identify the false signals. If the setups are not formed near the 38.2%, 61.8% or the 50% retracement level, taking trades is going to be a big mistake.
Price managing to break the 61.8% retracement level is a clear indication that the trend is changed. Regardless of your trade setup, careful examination of the news is required when you experience such issues. In most cases, the slope of the Bollinger band tends to change direction when you spot such massive diversion in the trend. Though it might take some time to spot the reversal with 100% accuracy, you are always welcome to trade in a demo platform.
Managing the risk
Risk management in options trading depends on expiry, time selection, and return from a certain trade. Taking trades in a higher time frame and depending on the trend allows you risk 2% with this model. On the contrary, options having less than 30 minute expiry period suggest you not risk more than 1%. Remember the output of each trade. It must be well above 70% to consider it as a valid trade setup. Ignoring these steps can put your capital and great risk even though they are relying on a very premium strategy.
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Partially Automated Trading Besides Your Day Job
Alerts In Real-Time When Divergences Occur
