I continue to share simple strategies for binary options trading with you. As practice shows, skillful analysis of the behavior of simple indicators allows you to track the exact entry signals with no less success than sophisticated technical analysis tools, piled on the chart of the asset price. Try the demo version of my proposed strategy and make sure it works properly.
Today’s strategy is based on one indicator with different periods. Strategy of two stochastics is a vivid example of how professionally you can use a popular oscillator and get profit.
The strategy of two stochastics
The use of 2-stochastic oscillators with different periods allows you to filter out false alarms, reducing the number of unsuccessful transactions:
- an oscillator with a smaller period gives more inaccurate signals;
- long period of the oscillator can provide the signals with delay;
- a combination of both options allows you to neutralize the disadvantages of both tools and to optimize their advantages.
The strategy of the two stochastics is simple: the short position is opened when both stochastics are overbought and start the reversal.
The parameters of the stochastic oscillators:
- basic stochastic oscillator — (21, 9, 9);
- additional stochastic oscillator — (9, 3, 3).
In order to successfully enter the market, investors should monitor the trend reversal points and open a position (buy an option to purchase or sell). Opening a position to buy (Call) occurs when both stochastics are in the oversold zone, both indicator lines will intersect. As soon as the current candle closes and new one opens, when the signal is confirmed by indicators, – buy an option.
Schematically, the deal to buy is shown below.
- The price is definitely moving down. The trader’s task is to determine at what point the trend will reverse and whether it will be a rebound (minor trend) or not.
- Basic stochastic falls below 20 into oversold zone, the indicator lines cross, stochastics turns up.
- Additional stochastic is also oversold and turns up.
As you can see from the picture, the price has long gone down, driving both oscillators in oversold zone. It was already a signal that the trend will soon reverse. It remained only to wait until the turn, which turned out to be the point of intersection of the oscillators. If we used only one light, we could enter the market on a false signal (arrow). The expiration time at least 3-5 candles.
A Put option open at the same, but the mirror principle: both stochastics above 80, the main stochastic crosses, both stochastic change direction.
As it can be seen from this figure, the original signal was received from the primary (slow) oscillator, however, the trend continued to go up. At the time, when the second oscillator also appeared in the overbought zone, the main oscillator is still not out of it, then the opening the positions are possible.
Strategy of two stochastics is simple, but requires time and proper understanding of signals. These periods of stochastic oscillators are chosen experimentally and allow you to get the most accurate signals for entry. Below are the screenshots of a real trade of turbooptions on the trading platform of IQ Option broker. The analysis was performed in the timeline of 15-30 seconds. Crossing the oscillators and entry points are marked with circles.