Binary Options Strategy Based on 2 indicators: MACD and Bollinger Bands

bollinger bands strategyToday I would like to introduce to you one very simple, yet efficient strategy for Binary Options. It is based on MACD trading indicator and we will filter out false signals with another indicator called Bollinger Bands (in some sources you will see it called BB).

To begin with, let me first give you a short explanation of how each trading indicator works and why we will be using it.

MACD trading indicator

MACD stands for Moving Average Convergence Divergence. Most probably 99% of you will not even know what that means and that’s ok =) In simple words, MACD indicator helps us find points on the trading graph, where trend reverses. Basically, that’s all we need when we trade binary options.

Nevertheless, you have to keep in mind that the smaller the time-frame you are trading with, the more you will see false signals. Ideal time-frame for MACD binary options trading is day-graphs. In order to avoid buying wrong binary option, we will filter MACD trading signals with another indicator – Bollinger Bands.

Bollinger Bands (BB)

In the end of 20th century, John Bollinger has introduced to the world Bollinger Bands trading indicator, which helps traders to understand whether the market is oversold or overbought. For those of you who are not familiar with these terms, I can explain in simple words: with this indicator we can see when offers to buy certain asset have overgrew the expected amount and, thus, possible reverse of the trend is expected. Or vice versa, it shows us when the selling of the asset is hitting its peak and the upper trend is soon to come to the action.

Trading Strategy: MACD + Bollinger Bands

By using these two trading indicators together we can trade options with the shorter time frames and yet keep high percentage of successful trades (in average this strategy will bring you a little over 80% of successful deals).

Bollinger bands and MACD strategy

On the above image you see a graph with overlay of Bollinger Bands on it (greenish cloud) and below the graph you can see the MACD indicator (I used standard settings: 12, 26, 9).

You should buy binary option when the blue MACD line is crossing orange (signal line). If MACD line crossed the signal line from the top, you should expect the price to drop and thus you should buy PUT option. If MACD blue line crossed orange signal line from the bottom, buy CALL option as the price will grow. You should also check the situation with Bollinger Bands. The closer the price to the Bollinger Band the shorter the trend will be.

For example, when the was the first crossing of lines, the price was very close to the border of the Bollinger Bands and thus we can estimate that the trend will be short. Taking into consideration that we are trading on H1 graph (each candle is 1 hour), I would open 1 hour option. In all other cases we can open binary options with even longer expiration time.

Please note that out of 6 trades, we had 5 trades in-the-money (marked with green oval).
You can see from this quick example that the profitability of this binary options strategy is 83%+

As you can see it is very simple yet effective binary options strategy. It fits not only advanced traders, but as well the beginning traders. To try it out you just need to open a trading account with one of the brokers of your choice. My personal recommendation would be FinMax as they have the most convenient expiration times that fit nicely this strategy. Good Luck!

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