Bollinger Bands have probably already been used by practically every trader on the financial market. Although it’s a very popular and widely used indicator, it’s still very accurate and useful on IQ Option.
Learn everything you need to know about using Bollinger Bands here.
Bollinger Bands are one of the most popular indicators in trading. And not just in day trading, but also in longer trading activities such as swing and position trading.
We can therefore consider it a very versatile indicator and one that is also easy to read and use. So if you’re a beginner, this is certainly one of the best indicators to use, but before you do, it’s essential to understand what it’s for and how you can use Bollinger Bands on trading platforms like IQ Option.
What are Bollinger Bands?
Bollinger Bands are a volatility indicator used to measure the overbought or oversold status of a particular asset. On the chart, it consists of two lines (or bands), plus a central one, made up of moving averages that provide this reading.
It was developed by John Bollinger, an American technical analyst, around the 1980s and officially launched in 2001.
How Bollinger Bands are calculated
As we mentioned at the beginning, Bollinger Bands are calculated using simple moving averages.
In the standard configuration of this indicator, the upper band is made up of the last 20 periods + 2 times the standard deviation. The lower band is the opposite and is made up of the same simple moving average, but minus 2 times the standard deviation of the last 20 periods. The center line is represented only by the 20-period simple moving average.
At IQ Option, the indicators can be adjusted, i.e. you can change the number of periods you want to use for each moving average. However, we only recommend making any kind of adjustment if you already have some experience of using them, since the default setting is the same as the previous one.
How moving averages work on IQ Option
As Bollinger Bands are made up of moving averages, it makes sense to talk about how they work. It’s nothing more than the average value of the price within the selected period.
In the case of standard moving averages, no adjustment is necessary. In the case of indicators such as Bollinger Bands, it is recommended to use a number of periods in your settings.
How to use Bollinger Bands on IQ Option
To use Bollinger Bands on IQ Option, you need to follow the same procedure as for other indicators, accessing the indicators menu in the bottom left-hand corner. Choose the “volatility” menu and then simply select “Bollinger Bands”.
Once you’ve selected them, you’ll notice a considerable difference on IQ Option, where the default setting of periods is 14, while its creator recommends using 20. In this case, we recommend following the market’s recommendation and if you see the need, gradually adjust it. Remember that there is no right or wrong indicator setting, so try to adjust your strategy if necessary.
Strategies on how to use Bollinger Bands on IQ Option
The first thing you should know about Bollinger Bands is that the price tends to stay within the 2 outer bands. What does this mean?
If the price fluctuates and tends to stay within the bands, the first thing you should look out for is when it touches or exceeds one of the bands, either the upper or lower one, because the price tends to return to the “normal” value, which is represented by the central line.
However, pay attention to the word “tend”, because in the financial market there are no absolute certainties, so bear in mind that not all trades made when the price touches one of the bands will work out every time.
And of course, you don’t have to be right every time. Maintaining a good level of assertiveness is enough to make money in this market and to increase your hit ratio, you should always use more than one indicator in your readings/trades.
Relative Strength Index (RSI)
Our first suggestion is to combine Bollinger Bands with RSI as a strategy on IQ Option.
In case you’re not familiar with it, the RSI is a percentage index, which runs from 0 to 100% and is usually represented by a single line on a chart. The closer this indicator is to 100%, it indicates overbought, which is usually called that when it is greater than 70%.
These percentages indicate volume in the market, where higher values (above 70%) correspond to overbought and lower percentages (below 30%) to oversold.
The oscillations of this indicator can indicate a change in trend and when the Bollinger Bands also indicate corresponding signals, such as candles breaking through the bands, you will have a great chance of winning when making a trade.
Our final opinion on how to use IQ Option Bollinger Bands
Using Bollinger Bands on IQ Option is extremely easy, both in terms of configuration and reading the indicator itself. As we mentioned earlier, just remember not to use this or any other indicator in isolation, in order to have a higher level of assertiveness in your trades.
It’s also important to remember to avoid making entries when the bands are very open, which indicates high price volatility at the moment, which can make the trade more unpredictable due to the large price swings.
Making trades when this indicator’s bands are starting to open is usually more advisable, as well as when the candlesticks touch or exceed the bands’ limits, either up or down, as the price generally tends to return to within the Bollinger Band channel on IQ Option.
After reading this article, you can get to know Bollinger Bands better with a demo account on the IQ Option platform, and learn about the most interesting trading strategies.
