Do you know that trading is very much like astronomy because there are patterns, maps and rules? And there is the STARC Bands indicator which is a more advanced tool than basic advisors like Stochastic, RSI and MA.
You can find classical and advanced tools in your trading account with the IQ Option platform. It offers a wide range of tools for successful trading. It should be noted that STARC Bands look similar to well-known Bollinger Bands, however, there are differences in application and calculation.
Manning Stoller is an inventor of the tool that is why it is often called Stoller’s Average Range Channels. In general, like any other channel indicator, this tool is designed to determine the range of price fluctuations that allows you to enter the trade at its tops.
The formula for calculating is very simple because it is based on a simple moving average (SMA), taken for a separate period. Then the indicator of volatility measure (ATR) is included in calculations. ATR is an important component of the formula to exclude false signals, which can be caused by market noise.
When calculating the upper limit of the channel, the ATR is added to the MA, and when calculating the lower limit – on the contrary, it is subtracted. As a matter of fact, an average trader does not need to know the intricacies of formulas, it is enough to know when the indicator gives a signal to enter the trade.
How to Trade with the Stoller Indicator
The advantage of the tool is that it is suitable for any timeframe. However, it is recommended to apply it on the lower ones for binary options trading.
Set up your chart as Bars or Japanese candlesticks and choose any asset with some volatility.
The recommended period is 6. It is based on practice and past cases while working with this indicator on digital contracts.
You should know that signals from STARC Bands are similar to the Bollinger Bands.
Buy CALL at a confident breach of the lower border of the channel.
Buy PUT during the exit out the upper border.
Before the conclusion, I would like to mention one more nuance. In the IQ Option terminal, the tool is almost indistinguishable from the Bollinger Bands. At the same time, it is refined on the MT5 platform, which makes trading more convenient. If you use MT5 platform, you should open a trade after the price enters the darkened zones, which are located before the lower and upper limits of the channel.
Expiration time should be set not less than the time of formation of 2 bars.
The basic trading strategy is to sell when the security’s price is near the resistance band and buy when the security’s price is near the support band. Favor this strategy when the price is in an overall uptrend or when the price is ranging.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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