What is Standard Deviation in Bollinger Bands

Bollinger Bands is one of my favorite trading indicators, but not everyone knows what is standard deviation in Bollinger Bands and what it means when using it as a trading strategy.

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John Bollinger created the Bollinger Bands in the early 1980’s. John Bollinger was trading options at that time, and a lot of his analysis depended on analyzing market volatility. Measuring the standard deviation as a measurement of volatility meant that he could measure volatility dynamically, by expressing it as a standard deviation.

All of this still does not answer what is standard deviation in Bollinger Bands, but we will get to that in a moment. This is what Bollinger Bands look like on a trading chart:

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In this particular chart, the settings for the Bollinger Bands are set to 20 periods with the standard deviation set to 2. Let’s discuss what is standard deviation as it pertains to Bollinger Bands. Imagine the Bollinger Bands to act almost like a road, and that the market prices, indicated by the candlesticks, are like cars on a road.

Formula_one

I’ve chosen racing cars in this case, since it’s easier to visualize. There are stages in a race, like at the start when the road or racecourse is straight, where the cars vie with each other to get to the best spot. Their movements are very limited, and although they move left and right across the road, because the road is straight, there really is not a lot of volatility. When the road opens up, we start seeing them hugging the corners as the race takes direction and becomes more volatile.

Their standard deviation starts increasing, since their movements  begin to change from being confined to a narrow straight road, to a more open winding track. When we speak of standard deviation in a scientific sense, the general assumption is that within 1 standard deviation we will find about 68% of all cases, and within 2 standard deviations we will find 95% of all cases.

What does that mean? Let’s return to the race track example, most of the time, all of the cars will stay within the boundaries of the road. The boundaries of the road when it comes to Bollinger Bands, are the upper and lower bands of the 2nd standard deviation. When one of the cars go outside those boundaries, and go off the pavement, it is not considered normal. The car either spun out, and will return to the road, or it might be that something else changed, and now the cars will all start following the new route – like if there was an accident and they all needed to avoid it.

When watching cars race like that, we know that they’re hugging the corners of the track because they’re moving in a new direction, just like market price action “hugs” the upper or lower Bollinger Bands because they are going to move in that direction. The bands of Bollinger Bands are the standard deviation lines, the “road” of the market. The same happens with the markets, as prices start start moving away from the average, away from the line in the middle of the road, and start trending to the top or bottom of the Bollinger Bands, we know that the market direction is about to change.

When prices are close to, or even outside of the upper or lower Bollinger Bands, we know that they are touching the outer limits of the 2nd standard deviation, and that it is not a “normal” place for the market to be. Where the 2nd stand deviation usually includes 95% of all cases, with the market, it usually represents the boundary within which you will find roughly 80% of all market movement. Therefore we know that just like in a car race, once price moves outside of the 2nd standard deviation, which is represented by the upper or lower Bollinger Band, something is about to happen.

If the “road” or the outer bands of the Bollinger indicator is straight, and we get price movement outside of the band, we can almost be sure that it is “driver error” and that price will return to the “road” inside the Bollinger Bands. However, once we start seeing the road widen, and prices start hugging the corners, we know that the market has chosen a new direction and is likely trending.

I hope that this has helped to answer the question of what is standard deviation in Bollinger Bands, and that you will be able to “drive” the markets better going forward!

Money In 60 Seconds or Martingale Madness?

Is money in 60 seconds possible and actually profitable with Binary Options? It turns out that it is not likely, but it definitely is possible, and a guy call Kazi Noor is proving it by keeping a weekly trade log as he goes from $45 to his current balance of just over $32,000 trading Binary Options.

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When I came across Kazi’s YouTube channel some months ago, I was slightly shocked and at the same time fascinated by his Binary Options trading strategy. He literally places multiple 60 second trades by following a set of rules that he came up with on his own, based on his own trial and error and past trading experience. Watching him place some of the trades literally made me wince, since he does exactly what almost every trader (including me) would tell you to not do – he martingales his trades.

To ‘martingale’ means to follow a gambling method where your assumption is that with every losing trade your possibility of a future winning trade increases, and therefore you double the money you put down to recoup the money you lost in the previous trade, and to still make money with your current trade. This can go wrong so badly so quickly, that you have to see a quick illustration to see what I mean. The numbers below represent a streak of losing trades, starting at a mere $5 and then doubling up each time, in order to recoup your losses, let’s see what happens in only 10 losing trades:

$5 $10 $20 $40 $80 $160 $320 $640 $1,280 $2,560

In only 10 losing trades, you go from risking $5 to risking $2,560! Now I looked at how Kazi enters his trades, which he does when the market breaks through a support or resistance point, and in the worst case scenario, I found you could get 16 losing trades in a row! That would take your trading amount to an incredible $163,840 on a single trade, in addition to the previous 15 losses!

I’m not doubting that Kazi is for real, and I believe that he really did take $45 and turned it into $32,545 in 25 weeks, but despite his training and methodology, I would still not advise anyone to try it. He places limits on how far he goes with his doubling-up strategy, but even then, his approach is likely to make most traders simply lose all their money. If you want to take a look at what he does, you can follow this YouTube link.

Kazi himself is very adamant that he is not using a martingale system. He insists that he follows the market trend by only trading in the direction of a localized support or resistance level breach, but he still relies on doubling up on a losing trade to regain his trading losses. At the heart of it, that is exactly what a martingale trading system is.

If you prefer to not risk your money with a 60 second martingale binary options trading strategy, you might want to rather take a look at some of these alternatives:

The Quantum Binary Signal Service

They offer the following:

  • Real hedge funds traders with 20 years of experience
  • Up to 3 quality trades a day sent to your mobile & email
  • Simple and takes only two minutes a day
  • Forex , commodities , stocks and indices
  • 75-85% monthly success rate
  • No experience needed
  • Low limited risk

Auto Binary Signals

They have quite a landing page, and you will see that they have tons of information on there.

I’ve actually tried them out, and if you go for their signals, be sure to only take trades where their potential success rating is above 85%, and then you have to take the trade as soon as possible after the alert.

Quadra Binary Options Signals

I haven’t yet tried this service myself, but I’m impressed by their site and their willingness to show their previous trades. Their performance for July gives them an 80% win rate, which is very good.

Moneta Method Binary Options Auto Trader – SCAM SKUNK or SLAM DUNK?

The Moneta Method auto trading software is currently in Beta testing, so if you like getting in early on a deal, this might be for you.

Full disclosure: We get paid a commission fee if you sign up using any of the links on this site.

I’ve looked at their presentation video and there are a couple of things that stand out, they aren’t claiming you will make a million in a month, so that is good. They claim to have been involved in creating multiple types of trading software over the last 12 years, so that also counts in their favor. They also state that it is not a get rich quick scheme, but that they deliver steady profits – all good.

Things started to get a little weird when the guy, Stanley Williams, started talking about how the Roman Empire used “Moneta methods” to control the finances of the people. The Moneta Method auto trading software claims to use the same tricks the ancients used to control finances, but this time it works in your favor. The Moneta Method algorithm was created some years ago, but could never be implemented successfully due to computers not being fast enough, or so the author claims. Now that computers have become much faster – totally agree there – they claim that their software is now capable of running their Moneta Method algorithm fast enough that it is profitable in actual trading.

They claim that some big bankers were interested in purchasing the Moneta Method auto trading software from them in 2014, but that they decided to keep it for themselves, and officially launch it somewhere during the 4th quarter of 2015 to a group of bankers at a fee of $125,000 per month.

In return for getting in on the Beta testing phase of the Moneta Method auto trading software, they ask that you write a review or do a short video testimonial of your results – fair enough I guess.

From their video it seems that it is possible to run their trading software in either auto mode, or in manual mode. I like that you have the option to switch between the two modes, and I will be testing that out.

I followed their registration process, and got assigned to the BeeOptions Broker, I’ve had an account with them before and I trust them. Once you’re done with the sign-up process of the Moneta Method, you get a short video that steps you through how to deposit money with the broker that was chosen for you. This is a fairly standard procedure that you will find with almost all auto traders.

Here’s what their trading board looks like, I checked a couple of the trades that were in “Open” status and it looked like only two of them ended up losing, but you’re welcome to check for yourself. I honestly think that the $1,8 million profit figure does not reflect someone’s live account though.

Moneta Method Trades

They claim that an investment of $250 dollars in your initial trading account, will give you profit of $200 per trading day, trading $25 per instance, which means that you would need about 10 successful trades and no losses. If there are losses, you would obviously need more trades. In theory this is all possible, but it remains to be seen if the Moneta Method auto trading software will deliver.

I will be posting updates on how this goes, but from past experience, I can tell you that I’m not convinced you will get $200 per day from this auto trader with only a $250 account.

So is Moneta Method auto trading software a Scam Skunk or a Slam Dunk? It’s too early to say with definitive proof, and I like to be fair, so I will reserve my final judgement until after I have seen some results. Their beta testers are at least not simply paid actors as far as I can tell, and they’re not promising you to become an instant millionaire, but whether they can deliver on their promises remains to be seen.

If you are interested in testing this out for yourself before I post my update, follow this link: Moneta Method

Moneta Method