Trading when the markets are ranging is often discouraged especially for inexperienced traders. When markets are moving sideways, you have no idea whether they'll reverse or adopt a new trend when they hit a support or resistance level.
However, sideways markets aren't always calm as most people assume. Some will have some volatility making them good for trading short positions. That is, 1 minute trades that allow you to profit before the markets change.
In order to make such trades, you'll need a combination of pin bar candles and Bollinger Bands. This guide will tech you how to use them to trade short positions on the IQ Option platform.
Overview of Pin bar candles and Bollinger Bands
Pin bars are a special kind of candle that has a small body and a long shadow. The shadow is at least two thirds the overall length of the candle. Pin bars can be bearish or bullish.
Bearish pin bars have an upward pointing shadow while bullish pin bars have a downward pointing shadow. This candle signals an impending trend reversal. The Guide to Trading Using Pin Bar Candles on IQ Option will teach you more about pin bar candles.
Bollinger Bands are a volatility indicator. This indicator consists of two bands placed on either side of a moving average. Besides volatility, B-Bands are also used to measure the strength of a trend. The Guide to Trading with Bollinger Bands on IQ Option will teach you more about trading using this indicator.
How to trade using pin bar candles and Bollinger Bands
As mentioned before, pin bars can be bullish or bearish. The interesting thing about these candles is that you can have orange colored bullish pin bars and green colored bearish pin bars. The thing to remember is that bearish pin bars have upward pointing shadows while bullish pin bars have downward pointing shadows.
How does this help? Once you encounter a bullish pin bar, you should expect that the trend will soon start rising and vise versa. Now, where do you enter your short position? When using pin bar candles alongside Bollinger Bands, your goal is to look at points where the outer bands touch or intersect with a pin bar.
For example, if the upper band touches or intersects with a bearish pin bar, you should immediately enter a 1 minute sell position. The cool thing is that this usually happens as the space between the bands starts to widen indicating the development of a trend. Take a look at the two snapshots below.
One is for options while the other is for digital options offered by IQ Option.
Trading using pin bars and Bollinger Bands on IQ Option
Start by setting up your Japanese candles chart. Use 1 minute interval candles. Your objective is to enter 1 minute trades. Trade entry should be at the close of the pin bar and the open of the next candle.
With your price chart set, the next thing to do is set up your B-Bands indicator. Simply click on the indicators feature then select popular. Finally, select Bollinger Bands. Make sure that the period remains 20 and the deviation is 2. Finally, click apply to set up.
Remember, your trade entry signal is when an outer band touches or intersects with a pin bar. If the pin bar is bullish, you should enter a 1 minute buy position. If it's bearish, you should enter a 1 minute sell position.
1 minute trades on IQ Option using pin bar and Bollinger Bands
In this example, we'll enter a 1 minute buy position. Notice the lower band crosses over a bullish pin bar. Immediately after this, the space between the bands starts widening. You should therefore enter your 1 minute buy position immediately the bullish pin bar closes.
This example has 2 trade entry points. In both cases, the upper band crosses 2 bearish pin bars. The gap between the upper and lower bands also widens. This is a signal to enter 1 minute sell positions. As you've seen, trading short positions during sideways markets isn't that difficult if you use pin bar candles alongside Bollinger Bands. I encourage you to try out this strategy on your IQ Option practice account today.
Then share your results in the comments section below.
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