The MACD indicator of binary options – is the use of classical technical analysis tool which is more popular in Forex. However, its advantages could be used here. I will add that you should not look for the “secret strategy” or “win-win tactics” — they don’t exist because if they existed, then everyone would have money and nobody would lose. The simple is near, and I’ll try to prove it on example of the divergence of the MACD.
MACD indicator of binary options
The advantage of this indicator is in its universality: the strategy can be used to trade in Forex and binary options. Moreover, the time frames can be almost arbitrary. Tactics are so flexible that it can work on classic options, as well as on the transactions of type “Stairs” or “One touch”.
But first a bit of theory:
- divergence — the condition of the market when the indicator and the price trend go in opposite directions. In other words, the indicator (any, MACD or stochastics) directed downwards, and at this time the price picks the highs and Vice versa. Traders interpret the divergence as a signal that the price will soon unfold. That is, the indicator does not accurately reflect the price movement (is goes ahead), and if a trader sees that the price is still going up and the indicator went into a turn, there is a good entry point into the market;
- MACD — a technical indicator demonstrating the strength of the trend. Based on moving averages. There are two versions: the linear and MACD-histogramm.
For work we use a time interval of 1 hour.
Conditions for opening a sell trade:
- the chart of the MACD indicator is above the zero level;
- the MACD of binary options draws two or more tops in the positive area;
- the new top was unable to update the high, but the price trend set the new max. Or the opposite condition: the indicator shows a new high and the price trend it does not set it.
Short position is opened, based on the fact that the market is growing unreasonably and next reversal is useful for us. If you analyze minute chart, the timeframe is 5 minutes, if you analyze the daily chart timeframe — 4-5 days.
The conditions for opening a buy trade:
- chart of the MACD indicator is below the zero level;
- the MACD indicator of binary options draws two or more cavities in the negative area;
- the new top was unable to update the minimum, but the price trend set a new low. Or the opposite condition: the indicator shows a new low, the price trend does not set it.
The more vertices of divergence of the indicator, the stronger the reversal of the price trend. That is, divergence with 4 vertices (the example in the figure) is more likely to make a reverse than 2 vertices. The recommended expiration time: 3 tops — 10 candles on the 4 — 15 candles 5 — 20 candles.
Practice the MACD indicator of binary options and use the Golden rule of traders: do not risk with more than 5% of the deposit on one deal.