Bollinger band trading strategy is considered to be one of the most profitable trading strategies among the binary options traders. The rising popularity in this strategy lies behind its high level of accuracy and simplicity. Professional options traders simply use the dynamic support and resistance level of the market to set their call/put option in the financial instrument. In this article, we will master the art of put option trading strategy by using the Bollinger band indicator. Bollinger band indicators are developed based on three moving averages. The upper moving average acts as the dynamic resistance level and the lower band provides the dynamic support to the financial instrument.
Let’s see how the professional trader uses the advanced put option trading strategy using the Bollinger band indicator.
Price action trading is considered to be one of the most advanced and précised trading strategy in the financial world. Professional options traders always use price action confirmation signal before executing any options trade. In the above figure, Professional traders waited patiently for bearish price action signal near the dynamic resistance level of the Bollinger band. Most of the time bearish pin bar and the bearish engulfing pattern is formed at the resistance level and this two candlestick pattern is considered to be most reliable price action signal in put option trading.
The trader must use the put option trading strategy in favor of prevailing long-term trend. That means this system is applicable only in the bearish trend. Special care should be taken while trading the pin bar and bearish engulfing pattern. If the price action signal formed at the dynamic resistance level has any part of the solid body exposed above the Bollinger band level then no put trade will be executed. The bearish candle must have a closing below the resistance level signifying the failure of the upward rise of the pair. Since this put option trading strategy is based on price action confirmation signal option traders can even make money using this technique during high impact news release. Though the system is extremely profitable and reliable traders should proper money management factors in order to avoid huge trading capital lost. In the eyes of trained professional, the most reliable set ups are more prone to fail. So if you truly want to become an expert option traders using put option trading strategy then make sure you have enough patience to wait until price action confirmation pattern is formed at the resistance level. Execute your put option order by risking a small portion of your account once all the trading conditions are fulfilled.