This binary options strategy makes use of the RSI indicator, using two different time frames to follow the trend. As a novice trader, this strategy can be a bit difficult, as it can be easy to get distracted once you start searching for the signals. Losses can start to add up quickly, so always be mindful of what point you’re at in the analysis process while reviewing charts.
- Chart Time Frames: 15 minutes and 5 minutes. The 15 is for trends and price direction, the 5 is for market entry.
- Moving Averages: 50, 21, and 5 bar EMA’s. These are used on the 15 minute chart.
- Support and Resistance: Lines can be drawn at anywhere they may prove important.
- RSI: To point out entry, set to 4 bars for signals that track the underlying price trend within the 15 minute chart. However, signals are only derived from the 5 minute chart.
- Candlesticks: Used with both time frames to identify price trends and entry points.
- Stochastic: Used to help spot the underlying trend, as well as to validate entry and exit points.
Being with 15-minute candlestick charts. Of course, Additionally, consider using a daily chart and/or hourly candlesticks to map out a few support and resistance lines before getting started. Once complete, move on to the 15-minute charts. If the current asset price is close to one of the support and resistance lines, this could act as a negating aspect for any signals that you note in that same direction. Use MA’s (moving averages) to identify the trend within this time-frame.
If the short-term price averages are higher than the long-term 50 bar MA then the price trend is upward. If they are underneath it, then the price trend is downward. Do search for higher highs points, as well as higher low points when the trend is upward, and lower high points, as well as lower low points when the trend is downward. Ideally, both conditions should be met, as this strategy does not perform well in a sideways moving market.
Once the trend is identified, wait for the signal. The setup commences whenever the RSI extends to overbought or oversold ranges. This strategy performs well with both price directions. Here we are assuming a downward price trend, so you’d wait around for the RSI to arrive at overbought level. This is going to occur when the price moves higher prior to returning to the present trend. Once RSI extends to overbought levels, switch to the 5-minute chart to locate the entry.
With the 5-minute chart you’ll hold out for a verifying signal. This signal can be a wide range of things, but will continue the underlying trend on the 15-minute chart. Prior to entering a binary options trade, support and resistance should be considered. If the price of your chosen asset is near support or resistance and the trade signal shows the same direction, consider waiting for a break through prior to opening the trade. If prices have previously moved through, or are between support and resistance levels, trend signals are likely to be profitable. Stochastic can also be used here. A position may be suggested by RSI.
This binary options strategy is based upon the shorter term charts. Although currency pairs are quite active in such time frames, it’s likely to be more difficult to forecast price movements using them than longer time frames such as one hour or one day. You’ll need to be fast to pick up some of the signaled trades when using this strategy. News events can have a massive impact when using this strategy, so steer clear of newsworthy assets when using it.