Strategies of binary options trading can be divided into three groups: simple (based on literally the same signal are not precise, but suitable for learning), graphic (based on the construction of the various figures by graphs, the orientation of which determines the nature of the trend, the oversold or overbought) and indicator.
Novice traders are advised to trade on one indicator. In order to reduce the number of false signals and smooth out noises you can use multiple ways:
- trade only in a quiet market. With a little volatility even one classic indicator is able to show the exact point of entry;
- use a unique composite indicators, which already consist of a set of functions. For example, Sidus-2 (applicable to both for Forex and for binary options, where there is a possibility of an early exit).
For more experienced traders the strategy on three indicators is suggested, which allows to reduce false signals of each individual indicator.
Strategy on three indicators
This tactic is an example of how you can use classic indicators, analyzing their concurrent behaviour on a single chart.
Recall an important point: indicators for Forex and Binary options can be the same, but the need to analyze them in different ways. If the Forex the trader’s task is to find the best entry point and exit time from market, in binary options he should be able to predict the trends through time. In other words, you need to be able to determine the strength of a trend and possible reversal points.
Strategy on three indicators works quite well on the time frames with a duration of 1 and 4 hours. It can be used on minute time scales, but it is better to apply it at relatively long intervals. As the underlying asset you can take any of the currency pair with one condition: they must be volatile and liquid, which is typical to major world currencies.
Indicators used in this strategy:
- Awesome Oscillator — “Awesome” oscillator of Bill Williams (an example of its use in a simple Forex strategy described here);
- Accelerator Oscillator — the indicator of acceleration, which gives the trader a signal of the deceleration or acceleration of the market, indicating the changing of trade situation;
- the parabolic indicator SAR in conjunction with the oscillators shows you exactly the entry point in the currency market.
Recommended trading platform MetaTrader 4. Its advantage is that if necessary, the investor can download any indicator manually. You can also use other oscillators, such as Stochastics.
Rules of entry into the market
The first signal comes when the parabolic indicator occupies a position above or below the price chart:
- if it is above the price trend, it is expected to open a short position (for lowering);
- if the indicator is below the price, it is the first sign of what is ahead, the prospect of opening a long position.
Analyze the motion of the oscillators. If “Awesome” oscillator turns red, and the second oscillator enters the overbought zone and is ready to start turning, it’s 100% the signal for the opening of short position on the next candle.
If the parabolic indicator is below prices, “Awesome” the oscillator is green, it is possible to open a CALL option. To simplify the understanding of the strategy instead of two oscillators, we set Stochastic. As soon as stochastic comes out of oversold area and is heading up, we open a buy position.
Strategy on three simple indicators is simple, but it is recommended as an auxiliary, because it requires the simultaneous coincidence of signals from three indicators. On the other hand, the trader is faced with a choice: to risk entering the market more often, but on less precise signals, or wait for a coincidence of all favorable conditions and take profits with minimal risk.