It is usually recommended to trade when the market is trending. Especially if you are at the beginning of your adventure with trading. The reason is that a ranging market is difficult to read and interpret. It is much harder to predict whether the price direction will move up or down in the nearest future.
Ranging markets have some potential to be useful nonetheless. They exert some level of volatility, which actually leaves them well suited to short-lasting positions’ trading. Changes occur rapidly, so the transactions have to be quick too. 1-minute trades will work well in such conditions.
Today I will write about the method that combines the use of pin bars with the Bollinger Bands indicator. Such a strategy allows you to trade when the market is ranging.
The basics of Pin bars and the Bollinger Bands indicator
We distinguish normal candles and special ones. Pin bars are an example of the latter. Their main feature is a very small body and one long shadow. On the other side, there may be a short shadow or no shadow at all.
We divide pin bars further into bullish and bearish ones. The shadow of bullish pin bars points downwards. The shadow of bearish pin bars is directed upwards.
Pin bars are the special candles that appear when a trend is about to reverse. You can read more about trading with pin bars in our guide.
Indicator with the name of the Bollinger Bands or B-Bands in short measures volatility in the market and the strength of a trend. Three lines are forming this indicator. The Simple Moving Average in the middle and two lines running on both sides of the SMA.
To learn more about the indicator used in our strategy, check out our article about Bollinger Bands.
A trading method that combines pin bars with B-Bands
You know already that pin bars are divided into two groups, bullish and bearish candles. Note that the color does not matter here. Both bullish and bearish pin bars can be green and red. What matters is the direction of the long shadow. If it points downwards, a pin bar is bullish. When the shadow aims upwards, a pin bar is one of the bearish ones.
Basically the direction of this long shadow of the pin bar candle is what you should focus on. When you detect a bullish pin bar, you anticipate an uptrend to begin soon. And when a bearish pin bar appears on the chart, a downtrend should be expected.
In trading, the most important question is when exactly you should open a position. In a method that combines pin bars with B-Bands, it will be the point where both meet on the chart.
Enter a short trade with a duration of 1 minute when a bearish pin bar candle hits or cuts through the upper band of the B-Bands indicator. You will notice that often this is the time when the gap between the indicator’s bands begins to increase, which forecasts a developing trend.
Open a long transaction which lasts 1 minute when a bullish pin bar candle touches or crosses the lower band of the Bollinger Bands.
How to trade pin bar candles together with Bollinger Bands indicator on Binomo
You need to be logged into your Binomo account and prepare the chart. Decide what asset you wish to trade and choose the Japanese candlesticks type of chart. Set the candle period for 1 minute because you are opening transactions lasting 1 minute with today’s method. You should enter the market when a pin bar closes and the following candle is about to begin.
When the chart is ready, you have to add the Bollinger Bands indicator to it. Go to the “Chart preferences” feature and find the “Bollinger Bands” on the list of the indicators. Please check that the period is 20 and the standard deviation is equal to 2.
You should open a position when the lower or upper band of the indicator hits or crosses a pin bar candle. You should go long when the bullish pin bar touches or intersect the lower band. Go short when the bearish pin bar meets the upper band of the indicator. At the same time, the gap between the bands should start to widen indicating the beginning of a trend.
You enter a trade when the pin bar closes and a subsequent candle begins. Hold a position open for 1 minute.
An example of a 1-minute buy and sell trades on the Binomo platform
Take a look at the chart below. A bullish pin bar candle hits the lower band of the B-Bands indicator. Open a buy transaction when the pin bar candle closes. Your trade should last for 1 minute.
In the next example, there is a bearish pin bar which crosses the upper band of the B-Bands. As soon as the bearish pin bar closes and the next candle begins to appear, enter a sell position of a duration of 1 minute.
Conclusion
A strategy that connects the Bollinger Bands indicator with the pin bar candles allows you to take advantage of ranging markets. This method is not difficult to apply, although it requires a high degree of focus and bears certain risks still. Nevertheless, your task is merely to notice the appearance of a special candle and observe whether it crosses the bands of the indicators or not.
Remember that there is a demo account on the Binomo platform. I strongly recommend practicing trading pin bars with the Bollinger Bands indicator there. It gives you an opportunity to check how the strategy works and learn reading the signals. Once you are confident using today’s method, go to the live account to try and earn some profits.
Have a good experience!