Bollinger Bands 60-Second Strategy

1. Bollinger Bands 60-Second Strategy: A Beginner's Guide

The Bollinger Bands 60-Second Strategy is a popular, short-term trading technique used primarily in binary options and Forex markets. It leverages the volatility-based indicator, Bollinger Bands, to identify potential trading opportunities within a very brief timeframe – typically 60 seconds. This article provides a comprehensive overview of the strategy, including the underlying principles of Bollinger Bands, the rules for entry and exit, risk management considerations, and practical examples. This guide is designed for beginners, assuming little to no prior experience with technical analysis or trading.

Understanding Bollinger Bands

At the heart of this strategy lies the Bollinger Band indicator. Developed by John Bollinger in the 1980s, Bollinger Bands are a technical analysis tool defined by three lines plotted on a price chart:

• **Middle Band:** This is a simple moving average (SMA), typically a 20-period SMA. It represents the average price over the defined period.
• **Upper Band:** Calculated by adding a standard deviation (usually 2) to the middle band. It represents the price level where the market is expected to reach if the current trend continues with a certain degree of volatility.
• **Lower Band:** Calculated by subtracting a standard deviation (usually 2) from the middle band. It represents the price level where the market is expected to reach if the current trend continues with a certain degree of volatility, but in the opposite direction.

The key principle behind Bollinger Bands is that prices tend to stay within the bands. When prices touch or break the upper band, it suggests the asset may be overbought. Conversely, when prices touch or break the lower band, it suggests the asset may be oversold. However, it's crucial to understand that a break of a band doesn't *necessarily* indicate a reversal; it can also signal the continuation of a strong trend. The width of the bands expands and contracts depending on market volatility. Wider bands indicate higher volatility, while narrower bands indicate lower volatility. [1]

Technical Analysis is the foundation for using Bollinger Bands effectively.

Core Principles of the 60-Second Strategy

The 60-second strategy exploits the rapid price movements often seen in volatile markets. The strategy’s core idea is to capitalize on the expectation that prices will revert to the mean (the middle band) after touching or breaking either the upper or lower band. The short timeframe necessitates quick decision-making and a disciplined approach.

The strategy operates on the following fundamental assumptions:

• **Mean Reversion:** Prices will eventually return to the average (the middle band). This is a key concept in Mean Reversion Strategies.
• **Volatility:** The strategy works best in markets with moderate to high volatility. Low volatility can result in false signals.
• **Speed:** The 60-second timeframe demands rapid execution. Delays can significantly impact profitability.

The Rules for Entry

The entry rules define when to initiate a trade. There are two primary entry signals based on the Bollinger Bands:

• **Buy Signal (Call Option):**

   1.  Price touches or breaks the *lower* band.
   2.  The price immediately bounces back *up* towards the middle band.
   3.  Enter a "Call" (Buy) option as soon as the price starts to move back up. The trade should expire within 60 seconds.

• **Sell Signal (Put Option):**

   1.  Price touches or breaks the *upper* band.
   2.  The price immediately reverses *down* towards the middle band.
   3.  Enter a "Put" (Sell) option as soon as the price starts to move back down. The trade should expire within 60 seconds.

• • Important Considerations for Entry:**

• **Confirmation:** Don’t blindly enter a trade just because the price touches a band. Wait for confirmation – the immediate bounce or reversal.
• **Candlestick Patterns:** Look for confirming Candlestick Patterns such as bullish engulfing patterns (for buy signals) or bearish engulfing patterns (for sell signals). These patterns add an extra layer of confirmation.
• **Trend Analysis:** Consider the overall trend. Trading *with* the trend can increase your chances of success. If the overall trend is upward, focus on buy signals. If the overall trend is downward, focus on sell signals. Trend Following is a powerful technique.
• **Avoid Sideways Markets:** The 60-second strategy performs poorly in ranging or sideways markets. The price may bounce between the bands without a clear direction.

The Rules for Exit

Exiting a trade is as crucial as entering one. Since this is a 60-second strategy, the expiration time of your option *is* your exit rule. However, understanding how to manage the trade within those 60 seconds is important.

• **Binary Options:** With binary options, the exit is automatic at expiration. The payout is fixed if the price is in the predicted direction at expiration.
• **Forex:** For Forex trades, use a tight stop-loss order placed just below the recent swing low (for buy trades) or just above the recent swing high (for sell trades). Aim for a profit target that is at least equal to your risk (a 1:1 risk-reward ratio).

• • Key Exit Considerations:**

• **Don't Hold On:** Do *not* attempt to ride the trade for longer than 60 seconds, even if it looks promising. This strategy is designed for quick profits.
• **Stop-Loss (Forex):** Always use a stop-loss order in Forex trading to limit potential losses.
• **Profit Target (Forex):** Have a clear profit target in mind before entering the trade.

Risk Management

The 60-second strategy is inherently risky due to its short timeframe. Effective risk management is paramount.

• **Small Trade Size:** Risk only a small percentage of your trading capital on each trade (e.g., 1-2%).
• **Capital Preservation:** Your primary goal should be to preserve your capital. Don't chase losses.
• **Demo Account:** Practice the strategy extensively on a Demo Account before trading with real money. This allows you to become familiar with the strategy and refine your skills without risking capital.
• **Money Management:** Implement a robust money management plan. Don't overtrade.
• **Avoid Overtrading:** Resist the temptation to take every signal. Be selective and only trade setups that meet all your criteria.
• **Emotional Control:** Trading can be emotionally challenging. Avoid making impulsive decisions based on fear or greed. Trading Psychology is vital.

Practical Example (Binary Options)

Let’s illustrate with a binary options example:

1. **Asset:** EUR/USD 2. **Timeframe:** 1-minute chart 3. **Bollinger Bands Settings:** 20-period SMA, 2 standard deviations 4. **Scenario:** The price of EUR/USD drops and touches the lower Bollinger Band. Immediately after touching the lower band, a bullish candlestick appears, indicating a bounce. 5. **Action:** Enter a “Call” (Buy) option. 6. **Expiration:** 60 seconds. 7. **Outcome:** If the price of EUR/USD is higher than the strike price at expiration, the option pays out. If the price is lower, the option expires out-of-the-money.

Practical Example (Forex)

1. **Asset:** GBP/USD 2. **Timeframe:** 1-minute chart 3. **Bollinger Bands Settings:** 20-period SMA, 2 standard deviations 4. **Scenario:** The price of GBP/USD rises and touches the upper Bollinger Band. Immediately after touching the upper band, a bearish candlestick appears, indicating a reversal. 5. **Action:** Enter a “Sell” (Short) position. 6. **Stop-Loss:** Place a stop-loss order just above the recent swing high. 7. **Profit Target:** Set a profit target that is equal to your risk (1:1 risk-reward ratio). 8. **Outcome:** If the price reaches your profit target before hitting your stop-loss, close the trade for a profit. If the price hits your stop-loss, close the trade to limit your losses.

Optimizing the Strategy

• **Time of Day:** The strategy may perform differently at different times of the day. Volatility tends to be higher during major trading sessions (e.g., London and New York sessions).
• **News Events:** Avoid trading during major news releases, as these can cause unpredictable price swings. Economic Calendar is a helpful resource.
• **Multiple Timeframe Analysis:** Use multiple timeframes to confirm your signals. For example, use a 5-minute chart to identify the overall trend and then use a 1-minute chart to find entry signals.
• **Filter Signals:** Combine Bollinger Bands with other technical indicators, such as the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), to filter out false signals. [2]
• **Backtesting:** Thoroughly backtest the strategy using historical data to evaluate its performance and identify optimal settings. Backtesting Strategies is essential for validation.

Common Mistakes to Avoid

• **Trading Against the Trend:** Don't trade against the dominant trend.
• **Ignoring Risk Management:** Failing to use stop-loss orders or risking too much capital on each trade.
• **Overtrading:** Taking too many trades without proper analysis.
• **Chasing Losses:** Trying to recover losses by increasing your trade size or taking risky trades.
• **Impatience:** Not waiting for confirmation signals before entering a trade.
• **Ignoring Market Conditions:** Trading in ranging markets or during major news events.

Resources and Further Learning

• **Investopedia:** [3]
• **BabyPips:** [4]
• **TradingView:** [5] (Charting platform)
• **Bollinger Bands Website:** [6]
• **Binary Options Strategies:** [7]
• **Forex Indicators Explained:** [8]
• **Technical Analysis Resources:** [9]
• **Trading Psychology Articles:** [10]
• **Volatility Trading Strategies:** [11]
• **Understanding Moving Averages:** [12]
• **RSI Indicator Guide:** [13]
• **MACD Indicator Explained:** [14]
• **Candlestick Patterns Guide:** [15]
• **Swing Trading Strategies:** [16]
• **Day Trading Strategies:** [17]
• **Scalping Strategies:** [18]
• **Position Trading Strategies:** [19]
• **Fibonacci Retracement Levels:** [20]
• **Support and Resistance Levels:** [21]
• **Trading Journal Template:** [22]
• **Risk Reward Ratio Calculator:** [23]
• **Economic Calendar:** [24]
• **Correlation in Forex Trading:** [25]
• **Elliott Wave Theory:** [26]

Bollinger Bands, Binary Options, Forex Trading, Technical Indicators, Trading Strategy, Risk Management, Volatility, Candlestick Analysis, Trading Psychology, Money Management

Start Trading Now

Sign up at IQ Option (Minimum deposit $10) Open an account at Pocket Option (Minimum deposit $5)

Join Our Community

Subscribe to our Telegram channel @strategybin to receive: ✓ Daily trading signals ✓ Exclusive strategy analysis ✓ Market trend alerts ✓ Educational materials for beginners