This binary options strategy is similar to scalping in that shorter expiry times are used to profit from short-term price movements. This strategy is simple enough to be used by beginner level traders, but when used as designed, it is among the riskier trading methods. A bit of previous experience, or the use of additional indicators to verify the price action will certainly render it even more effective.
This strategy is most effective when the asset price is moving between key support and resistance levels, and not so volatile that it has moved past either of these levels. The goal will be to cash in on bearish market conditions that set up over a shorter period of time. The primary benefit of this strategy is the potential to earn sizable profits quickly, with the ability to repeat the process over and over again.
The standard Put or Call binary options trade will be used, along with an expiration time that is no longer than 15 minutes. The main focus will be on the resistance level, along with how the asset price moves when the level of resistance is reached. The first step will be to locate an asset that has been relatively stable, or range bound, for some time. If the support and resistance lines are clear, the asset can be selected.
To view the price action, select a 5-minute technical candlestick chart. Within this chart you’ll be watching for the asset price to reach the level of resistance and then reverse direction. When this happens, immediately watch for two red candlesticks to appear. The entry sign comes when the third red candle appears. The indication will be that the price is going to rise over the short-term, so a Put contract will be purchased. There will be a suitable window for market entry, but the sooner the trade is taken, the better.
One of the primary benefits of this method is how straightforward it is. You’ll only need to verify that the closing of the first candle is below the previous bullish candle. The closing of the second simply needs to be below the first. When the third arrives, it’s time to trade. When all of these conditions are met, the odds of Put being the correct selection are quite high, so long as an expiry of no longer than 15-minutes is selected. Depending on the broker being used, a 5-minute trade could be opted for instead.
Although beginners can use this binary options strategy, it will be more powerful for those who are familiar with candlestick charts and who possess some knowledge of how to select optimal expiry periods. The expiry time selection is always extremely important when using methods that are designed to provide profits from short-term movements. Best use will include entering into a trade as soon as verification is clear. The longer the wait for market entry, the riskier the trade will be.
Finally, consider only using this strategy along with assets that are not exhibiting volatile price movement. Stable movement will provide a much clearer view of what to expect from the upcoming movement. Also, consider paper testing this method several times over before using it in an investment situation. All binary options strategies should be tested before being utilized within an actual platform, regardless of how effective they appear to be.