Not difficult trend strategy
Trend strategies show themselves well on binary options market, demonstrating rather good profitability. The only problem for a trader is to catch a moment of the beginning of the trend to have enough time to start getting profit from the beginning to the end of trend moving. Of course, it is difficult to work without true helpers of traders – indicators.
There are many trading strategies on the basis of indicators: successful and not, profitable and loss. It was always so, but binary options market has its peculiarities. Because of difference between financial markets and binary options trading traders have to think how to use successful strategies with options to get the same profit or even more. And we must say they are good at it, because there are such strategies and one of them we are going to consider today.
As the strategy for binary options is rather young, it hasn’t got its name yet, that’s why you can name it as you like. To work with the strategy we choose currency pair Euro/Dollar, although the authors are sure that the strategy is multiple currency and it can be used in trading by any instrument. Timeframe of the chart, we are going to watch, is also traditional and is 1 hour.
We need to set the division between periods and Bollinger Bands with the next settings on the chart for trading. The period is day and night, that is 24 hours, the shift in the field is 0, in the field of deviation we put 2.
Next we set the indicator Envelopes. This indicator is the part of standard indicators, which are in trading terminal Meta Trader 4. You should search for it among oscillators. After you have chosen the indicator, the window with settings will be given to you.
For work you need: period – 233, shift – 1, method МА – Exponential, apply to close, deviation – 0,15%.
We would like to stop a bit at the indicator itself, to let you understand the principal of work and generating of the signals in trading system. The indicator shows the price oscillation on the certain part of the market and works in the same principal as Bollinger Bands. It consists of two sliding average, in our case exponential. Upper boundary is of blue color, the lower is of red color. The higher is the volatility in the market, the bigger is the distance between upper and lower averages. If you did everything right, you must have such chart.
Now you can wait for signals. As the authors of the strategy thought, signal for trading option Put appears when the price crosses the red line of the indicator form up to down and closes lower than it. Then we enter the market according to the price, which is traded at this moment. The expiration time of the option is set out till the end of trading day that is till 0.00 GMT. Next, every day at 0 GMT we open new option for sale to get the signal about coming out from the market.
This signal is formed in double crossing of the level of upper line of Bollinger Band. If the price breaks down this level and goes further in trend, in this case, when this level is broken down for the second time, we come out of the market, waiting the expiration time of our option. Next, we wait a new signal to enter the market.
If the price, having broken down the upper line of Bollinger Band goes down, and then comes back to the same one, but with lower price, the previous signal is cancelled and to come out of the market, there is double break down of this renewed level. May be it sounds rather tangled, but on the chart it will be clearer.
Judging by this situation, trading with this system, we could get 5 closed deals, 4 profitable and only one loss. That is the generation of profitable trading signals on this part of the chart is 80%.
The signal for purchase, or the option Put is opposite. Here we will watch at the breaking down the blue line of the indicator Envelopes, but the signal for coming out of the market will be lower line of Bollinger Bands. All other conditions to close deals are the same. Let’s look it at the chart example.
In the given situation we would be able to get profit for three days, and only the fourth option could bring to us a loss deal. Finally such losses would be easily compensated by profit, we got before.
Finally, we would like to say one thing. If you want to get practically 100% of profit from this strategy – you can not risk and start deals only with the indicator Envelopes and come out at the end of trading day. The profit will be practically guaranteed.
Testing it on the history showed that profitability of the signals in this interpretation is about 95%. But there is one nuance – there will be a few deals, because this strategy generates not more than 2-3 signals to enter a month. But for novices it is perfect possibility to become sure that binary options can bring profit.
The strategy really deserved attention, because it has good level of profitability and is not difficult to understand. The beginning trader may for the first time have some difficulties, but having closed couple of deals and he will understand everything. The theory is a part of practice, don’t forget about it.
The advantage of this strategy, in our opinion, is the fact, that it doesn’t demand much time to analyze market situation, it is enough to look at the chart once a several hours not to miss the signal. As the signal for entering the deal is rather simple with usage of only one indicator, you can set sound signal in Meta Trader 4, having reached certain price and not look at the chart.
The disadvantage of this strategy, as of all trend strategies, is late signals for coming out of the deal. Of course, one loss option from 3-4 profitable is not so much, but of course we would like to avoid it. In our opinion, there is a way to improve this strategy to reduce losses. The first way is to enter the deal only for one day and night and then wait for a new signal.
The second way is not to opennew option in trend, if at expiration time the price hasn’t completed at least 10015 points. It will let you to minimize losses, but the number of deals will be also less, and possible profit as well.
To trade with this simple system, you can take classical binary options and options TOUCH, conditions to get profit are done in the majority of deals, closed according to the system.
What expiration time should you choose for the given strategy? Taking into account, that identification of trading signals we do on the chart H1, expiration time must be 6 hours. This time is necessary for the price to be increased or decreased in the contract of binary option.
As it has been already mentioned above, you will have one loss deal and 3-4 profitable ones. What does it mean? It means that profit-factor of the system is rather high and if you follow conditions for closing deals correctly, your deposit will start increasing very soon. For example, with starting lot 100USD and percent of paying out for average options in the size of 100%, during one week you can earn with in trading instrument not less than 500 USD.
It isn’t worth underestimating the market, when you trade with any trading system, even if it is very profitable. The starting lot for entering the deals must be about 3% from the size of deposit.
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