Luckily for beginner traders, Binomo offers several technical analysis indicators that can greatly help when trading on the Binomo trading platform.
Two of the easiest, as well as most popular, indicators to use are Relative Strength Index (RSI) and Bollinger Bands. Alone, they’re a great way to predict market movement and possible trend reversals. Together, they’re practically unbeatable and can help any trader, beginner or otherwise, to increase their winning trades on Binomo.
In today’s guide, I’ll teach you how to use Bollinger Bands and RSI to complete winning trades when trading long and short positions on Binomo!
How to use Bollinger Bands and RSI on Binomo
It’s not always easy to analyze the true price direction of the market, especially when trading short interval candles. That’s because short interval trades typically have too many price fluctuations, which can be very overwhelming to the majority of traders.
On the other hand, if you’re trading longer interval candles, namely those that last at least 5 minutes, then identifying, following, and analyzing price movements tend to be much easier. With the Bollinger Bands and RSI indicator pair at your disposal, you’ll definitely have a better chance at landing winning trades.
Before we proceed, would you like a refresher on the Bollinger Bands and the RSI indicator? Check out our Guide to Using the RSI Indicator to improve your demo trading on Binomo! You should also take a look at our Full Guide to the Bollinger Bands Indicator if you’re having difficulties.
With that out of the way, here are two important things that you need to look at if you want to trade on Binomo using Bollinger Bands and RSI as your indicator pair.
The first important thing is the price at the upper or lower bands on the Bollinger Bands indicator. The second important thing is the divergence–or lack thereof–on the RSI indicator.
Let me give you a sample scenario. For instance, say that the price is at the upper band. Given this scenario, you’d probably expect that the RSI is almost or at the overbought level. If there’s an RSI divergence, however, it would show a lower high where there should be a higher high. This shows you the kind of relationship you’re looking for between these two indicators.
On the other hand, when the price is at the lower band, you should expect to see a lower low on the RSI indicator. A higher low, however, means a divergence. Again, this is the kind of relationship that you’re looking for when trading with the Bollinger Bands and RSI indicator pair on Binomo.
How to set up Bollinger Bands and RSI on Binomo
It’s very easy to set up the Bollinger Bands and RSI indicator pair on Binomo.
First, click Chart Preferences on the left side of your screen. Here you’ll see different indicators and tools that you can use for technical analysis.
You can choose which one to select first, RSI or Bollinger Bands. It doesn’t really matter, but for the purpose of this guide, I’ll select RSI first. The default values will be 80 for overbought, 20 for oversold, and 14 for the period. Leave these settings as they are. You might want to change the default colors for the levels, though. I personally prefer green for overbought and red for oversold.
Next, go back to Chart Preferences > Indicators, and find Bollinger Bands. The default settings are Close for field, Simple for moving average type, 20 for the period, and 2 for standard deviations. Same as with the RSI indicator, just leave the values alone and change the colors to your preferred ones.
How to trade Buy positions using Bollinger Bands and RSI on Binomo
With your indicators fully set up, your next step would be to learn how to actually use them to trade on the Binomo trading platform.
The first thing you should do would be to look at areas where the prices are ranging. These are easy to see because the bands are especially narrow in these areas. Next, take a look at the RSI indicator. Does it show a divergence? If yes, this is a great time to enter longer trading positions.
How to enter a sell position on Binomo
Take a look at our example below. As you can see, the gap between the upper and lower Bollinger bands are starting to narrow as the prices themselves start falling within a narrow range. Looking at the RSI indicator, however, you can see that there’s a bearish divergence wherein the indicator almost crosses the 20 level. As we’ve previously discussed in other guides, an RSI level below 20 on the Binomo platform signals an impending downtrend. This would be a good place to enter a sell position.
How to enter a buy position on Binomo
Identifying areas to enter a buy position on Binomo is quite easy once you already know how to do the opposite. As you can see in the chart below, the gap between the upper and lower Bollinger Bands starts narrowing at the end of the downtrend. Meanwhile, the RSI indicator below is showing bullish divergence, eventually crossing the overbought level at the 80 mark. This means that the bulls are taking over the market and that it’s a good idea to enter a buy position.
Similar to the above tip, if you’re using 1-minute interval candles, you should leave the trade open for at least 10 minutes to really see the results.
Final tips when using Bollinger Bands and RSI to trade on Binomo
Using Bollinger Bands and RSI to trade on Binomo may seem easy, but there are a couple of things that you should remember first before attempting to use this indicator pair.
First of all, they should only be used to trade longer trading positions, never short positions. That’s because short positions often have plenty of fluctuations, which makes this strategy less reliable. That means if you’re using 1-minute interval candles, your trade should last at least 10 minutes. If you’re using 5-minute interval candles, it should last at least 30 minutes. Even if you want to end the trade early, it’s best to let the time run out to avoid risky price fluctuations.
Second, although this indicator pair works well in various markets, they’re best used in currency pair markets, at least in my experience. Ideally, the currency pair should also be easily affected by news and other external events. Why? Well, prices always tend to consolidate and then adopt a sharp trend around the time that news stories are released. You’re most likely to see a divergence in the RSI indicator during price consolidations, so you should choose a market that is very dependent on that kind of factor.
Do you think you’re ready to start using this strategy in your next trading session? Don’t forget to sign up for a free Binomo demo account now so that you can practice without risk!
Good luck on your trading journey with Binomo!