Bollinger Bands : 3 Best Ways To Use Bollinger Bands in IQ Options

Bollinger_IQ_Option

Bollinger Bands

Today we talk about Bollinger Bands.

  • How to use Bollinger Bands to analyze a trend structure.
  • Fading momentum
  • How to find reversal Trades that lead into great new trend trades
Bollinger Bands

First of all I use the 2.5 standard deviation Bollinger Bands. so if you click on the settings and then you go to inputs here you see it’s 2.5 standard deviations whereas the standard is 2.0 but I find that 2.5 works better for the purposes how I use it and it makes the signals more meaningful on the Bollinger Bands.

How to use Bollinger Bands to analyze a trend structure

So the first thing I always look for when I use the Bollinger Band in iq options. it’s that it’s helping me to analyze trend structure. and keep in mind the Bollinger Bands see the outer bands that you see around price, they measure volatility and also momentum. so they always adjust based on the current price action when you have lots of momentum and volatility then they get wider and when you have more small candles and volatility momentum are drying up. then the Bollinger Bands come closer together.

So and now I used the Bollinger Bands to analyze trends and this is a very important feature of the bands. so you can see here price was in a downtrend and all the time during the downtrend price stayed very close to the outer Bollinger Bands and this in the middle is the 20 period moving average and you can see during the trend it always stayed below the moving average and also close to the outer Bollinger Bands.

Bollinger Bands : Uptrend

This is a very common feature during trends you can see it all over again here as well. it never really leaves the outer Bollinger Bands and it signals a very good trend with lots of momentum in the right direction here as well and of course it also works to the upside although you already see that he had pulled away a little bit from the Bollinger Bands but we will explore that later.

So the first thing always is to look for trends when they close to the outer bands then it’s signal strength.Then as you probably know if you’ve been following iqoption bot for some time I always look for fading momentum and trends that could end soon and also here the Bollinger Bands can help you achieve that so when we know that price stays close to outer Bollinger Bands during the trend then when price suddenly pulls away from the Bollinger Bands and does not reach the outer band anymore it tells us that something is happening and that the ongoing trend is losing strength and momentum.

so here for example we were in the downtrend but then suddenly price started consolidating sideways it did not make another run at the Bollinger Bands when we look closer here we can even see that we had this long doji pin bar with the strong rejection to the upside to the downside and then after we moved higher so price did not make it to the outer buns event anymore and even start moving higher.

Downtrend

Then the final piece is I always look for the brakes of the moving average because you can see especially here’s a nice example we were in this downtrend priced below the moving average and close to the outer Bollinger Bands. and throughout all the time during the downtrend price rejected moving average and every time we try to break it it got rejected and we closed lower again.

But then suddenly something happened and changed in the price structure price try to break the outer Bollinger Bands here with a spike immediately got rejected and then suddenly we broke the moving average to the upside and it’s a very different from what has happened previously here whereas we were always able to hold the moving average then here it broke and the signal then the next trend wave to the upside.

Retracement

and this is a very common behavior at the end of trends here as well first we started pulling away from the outer Bollinger Bands we made few runs and then finally broke the level here at the moving average but already you can see that here we did not break it as strong we were just consolidating and moving sideways into the moving average and then only moved a little bit higher it’s very different from what has happened here will be very violently violently broke the moving average and then start a new trend.

 

So here as well is a very nice example first we were in the downtrend then price fail to reach the outer Bollinger Bands here on the lows then here even you can get the price action signal this is a bullish outside bar which is completely engulfing the previous red bar and then here on the upside we were breaking the moving average very strongly. although we made a retracement back into the moving average we continue to move higher.

Trend Following

Afterwards and this is a very common behavior you can see as well here we were in this uptrend and right now first we were moving close to the outer Bollinger Bands then we made a retracement and now we did not quite make it back into the moving average it seems like we are failing to reach it this time so here price made another run edit I did not quite make it to the outer band.

Here again we have something like a outside engulfing bearish candle which signals weakness and now price started moving lower so if this candle or any next candle would strongly break the moving average here then we could potentially get a new bearish trend and a complete friendship from the current bullish trend

And here is another example from current price action we saw the price was in this very strong downtrend again here price stayed very close to the outer Bollinger Bands and then suddenly it started moving away you can see price never really reached the moving average here so the trend was there confirmed.

Sideways Consolidation

Here provides pulled away further from the moving average it did try to run and break it but we got rejected here we made another run at the moving average at the outer Bollinger Bands but then we just started sideways consolidation here without any real selling pressure anymore and now suddenly we are breaking the moving average to the upside. this is a very strong break if we compare to what has happened previously. we’re where we were never really able to close above the moving average.

so this could very well signal a new trend and this is basically how you can use the Bollinger Bands to analyze the trend strength to find fading momentum or to find confirmation in your trend. and then also to time your trades and your reversal trades that could then potentially give you entries into the opposite direction and be very early in your new trend following trades.

Bollinger Bands PDF