People are buying trading strategies, signals, and bots from the online market place. Some of the rookies in the United States and United Kingdom are going for the most expensive trading method. But do you really think the expensive trading method is going to work? The straightforward answer is no. The trading method might give you an edge in dealing with the complex market but it will never enable you to make insane profits consistently. To make a consistent profit, you should devise a trading strategy. Creating the trading method is not difficult. In this article, we provide you with instructions on how to create the perfect options trading method in less than a week. Following the tips in this article can possibly change your life and save you a huge amount of money.
Functions of the Bollinger Band Indicator
Bollinger band is a very popular indicator and the professional traders use it to take trades in the financial market. It has three distinct bands that give the traders a clear clue about the market. The upper band act as the resistance level and the lower band act as a strong support zone. The mid-band is more like the profit-taking zone. We will be using the Bollinger band to create our 5-minute option trading strategy. By the term 5 minute, we are referring to the fact that the expiry for the trade will be 5 minutes and we will analyze the data in the 5-minute chart. Also, there are other essential tools for any serious trader who wants to be more successful in the markets. Some tools allow users to trade with each other in real-time and get instant feedback about their trades, and some tools, like Telegram to MT4 Expert Advisor app, provide users with a variety of charts and indicators that they can use to make more informed decisions about their trades.
Finding the Trading Zone
Now that we know a little about the basics of the Bollinger band, it’s time to create a well-balanced options trading method as we have promised. Switch to the 5-minute chart and look for a single pin bar formation at the Bollinger band support resistance level. A pin bar is a single Japanese candlestick that has a very small body and a very long wick. The ideal pin bar should have the wick length three times its body. When you spot the pin bar, it’s time to use some external tools to analyze the quality of the trade setup. Note that if the pin bar is formed at the Bollinger band resistance, we will call it bearish pin bar and if it is formed at the support level, we will call bullish pin bar.
Use the Stochastic Indicator
When you spot the bullish pin bar the reading in the stochastic indicator must at 0 -20 level. This level is considered as the buying zone as the sellers get exhausted when the signal line in the stochastic reaches this level. We can take the call option when we spot the bullish pin bar and oversold stochastic reading. For the short trade, we need a bearish pin bar and overbought stochastic. This means the reading in the stochastic indicator should stay in the range of 80-100 level. This level is the perfect place to short the asset. If the conditions are fulfilled, take your put option.
Dealing with the News
This trading method is designed to trade a stable market only. So, you can’t take any trade during the major news. If you intend to trade the news, you have to consider other variables. You must learn to decipher the news factor. Unless you want a super complex method, use this method and you will see steady growth in the equity curve. This will help you to increase the profit over the period. As you gain more skills, you can use other forms of price action signals to revise your trading method and improve the system.
Risk Exposure
The system is well balanced and it can generate a decent profit. But nothing is perfect in this world. You have to prepare to lose some trades. So stop risking more than 1% when using this trading method. This will keep the fund safe and keep you relaxed.