2 Bollinger Bands offer a lot of trading points. This is the sharings of reader Olymp Trade Club. We will give more details about this strategy before giving our own opinion.
- 1 Necessary knowledge for trading strategy with 2 Bollinger Bands
- 2 2 ways of trading strategy with 2 Bollinger Bands
- 3 Review Olymp Trade trading strategy with 2 Bollinger Bands
Necessary knowledge for trading strategy with 2 Bollinger Bands
Set up 2 Bollinger bands: BB1 (SMA 20, Standard: 2.0), BB2 (SMA 20, Standard 2.5). These Bollinger bands are just different in standard deviation index, therefore, you can see another Bollinger band outside. To adjust the Bollinger band as your necessity, you can find more information here: Increase your winning probability to 80% with Bollinger band indicator in Olymp Trade.
Trading products at Olymp Trade: EUR/USD and GBP/USD for morning session. USD/JPY for afternoon session.
This is the method based on candle’s color (5 minutes): There is a candle that signs the point to buy options. If you do not know how to trade with candle’s color, you can read: Detailed guide about trading with candle’s color.
Capital management strategy: As flexible as possible. You can invest the same amount to each option or invest with the compound interest rule.
2 ways of trading strategy with 2 Bollinger Bands
(1) When a candle appears outside 2 Bollinger Bands
This strategy is easy. The signal candle appears outside the Bollinger Bands zone. It means that the price is over BB2 line (SMA 20, Standard 2.5), buy the opposite option to the candle’s color.
The default setting of Olymp Trade for BB indicator is 2.0. However, when we set the index as 2.5, the candle rarely appears outside BB2. With this strategy, you should invest a stable amount for each option.
Example: When price goes over the upper band of BB2 line, creating a green candle outside the band (This is the signal candle). At this moment, you can trade the option DOWN as expectation is that a red candle appears next.
On the contrary, price goes below the BB2 line, creating a red candle outside the band, you can buy the option Up as expectation is that the next candle is green.
(2) Option trading when candle appears between 2 bands
Explanation: When candle appear outside BB1 but inside BB2, buy option. This is also a strategy based on candle color. However, with this strategy, you trade the same option with the color of the signal candle. For example, if the signal candle is green, you open options UP.
Details: When price goes over BB1 line and green candle appears but the green candle is still below BB2 line – it is a signal candle, you can buy the option UP.
When price goes below BB1 line, creating a red candle above BB2 line, you can trade the option DOWN.
Capital management strategy at Olymp Trade
With this strategy, you can invest with compound interest rule, increasing your money if your estimate is correct, for 2 options at the most. For example, in the first option, you invest 50$, if you win and the candle continues to appear between 2 BB lines, you can buy another option with 91$ investment (compound interest rule). No matter you win or lose in the 2nd order, you have to stop, if you lose in the first order, you should stop trading and wait for the suitable trading point.
If you do not understand the strategy, you can leave comment and we will explain further. In the next part, we will give our opinion on this strategy
Review Olymp Trade trading strategy with 2 Bollinger Bands
When price goes above BB2 (SMA 20, Standard 2.5)
This is a strategy that go against the trend. There are rare traders who win with this strategy.
Therefore, if you do not have enough patience to wait for the right trading point, you should not use this strategy.
When price is between 2 BB lines
According to the photo that trader sent to us, this strategy seems to be profitable, however, something seems to be wrong. In my opinion, in her chosen trading time, price is not affected by news. Therefore, although price goes over the BB1 line, it still can adjust its movement back to the normal trend, this may be the real knowledge that was used to trade options. If I was in your position, I would not feel like buying options with strategy.
What’s more? Give us ideas by leaving comments below this article.