The strategy “Complete fading” for binary options
Despite the fact that binary options markets and Forex differ, some trading strategies are successfully used in both of these markets. Some traders doubt in successful work with binary options of profitable strategies Forex, the practice persuades us in another situation. Of course, we have to change something in such strategies, but the fact is that such strategies go on bringing profit in binary options market.
Today we are going to speak about the strategy, which in its work uses just two indicators - Relative Strength Index or just RSI and Bollinger Bands. The principal of work is to catch the moment of correction or back off on the bases of these instruments, and, of course, to get profit. But let’s consider everything in details.
It is necessary to point out that the strategy, we are going to discuss, is multiple currency, it means that you can work with any financial instrument, without having installation settings. Such universality of the strategy is very comfortable, but not this identifies the value of the strategy, but the quality of guaranteed by it signals. The results here are worthy. Testing the strategy with two currency pairs EUR/USD è GBP/USD showed 80% and 70% profitable signals a year. In our opinion, it is good results, that’s why we will consider all details of this strategy.
So, it is necessary to have two indicators for the strategy, which you must put on hours chart, because we will work with it – RSI and three Bollinger Bands, with the period of 20 and declines 3, 2 and 1. The first indicator is in the category of oscillators, but the second one is in the category of trend indicators. Each of the lines we put separately.
We are setting the shift 3, 2, 1 in the same name field, or if you have English interface, the field «Deviations». We advise you to make them of different colors not to have everything the same on the chart and to differ them. We offer you to move from lighter color to darker one. That is the line with shift 1 is the lightest, with shift 3 is the darkest.
After you have put indicators on the chart in terminal, you can see approximately such picture.
Now let’s speak about signals. We close a deal, keeping just two conditions. The first condition is to have the indicator RSI in the zone of rebuying that is more than 70, or in the zone of reselling (less than 30). The second condition for forming the signal on Put or Call – is to cross or at least touch upper or lower shadow of the candle the extreme Bollinger Band with the decline in 3.
If two conditions are kept, you need to wait until an hour candle closes in the interval between Bollinger Bands with the decline in 1 and 2.It tells us that financial asset, we are going to work with, passed its maximum or minimum and the phase of back off will start.
Such correction, usually, lasts minimum for 4-6 hours, it will be enough to get profit. When the candle closes, we enter the market with the option PUT or CALL with the expiration time 6 hours. It is not worth setting more time, because the correction can finish and the pair will continue its motion in trend, and we will have losses. Less expiration time of option is also inexpedient, because before correction small flat is possible, which can last for 2-4 hours.
Experienced traders know about this specific, when the market tries to trade maximum or minimum during certain period of time, but it can’t do it, and finally, the price is spent on correction.
If you look at our chart carefully, you can see two signals for Ñall and Put options. But for those who can’t notice without our hint, let’s explain everything in details.
As you can see according to the chart, big number of signals are not generated by trading strategy. The frequency is about one signal a week, but remember that you must monitor the situation in the market every day, at least once an hour, it can cause some discomfort for traders, whose trading isn’t the main activity, but they combine it with their job.
Our estimation of trading strategy
It is high time to sum up, traditionally let’s start with positive moments.
If to speak about the profitability of this trading strategy of binary options market, it is on very high level. Not every strategy can boast with such high level of profitable deals. The strategy is not difficult, even a novice of the market can understand the conditions of opening deals.
Also the advantage of working with this strategy in our opinion is the fact that the strategy shows itself very well in the moments of flats. During trend motion it is not worth working with the strategy, because you can meet a lot of false signals and will have losses. However in the market trend motions take just 20-25% of the time. All the rest is flat.
Rather strict and hard conditions for entering the market will secure trader from unnecessary losses, letting you get the profit from 7-8 deals from 10 closed ones.
A positive moment is multiple currency of the strategy, that’s why trading with several trading instruments, you can increase the number of signals.
Now let’s speak about disadvantages of the strategy. There are not a lot of them. Firstly, the strategy demands constant attention to the market, not to miss the signal for closing a deal. But the number of signals is not big. That is one or two times a week you will get the profit, but you will have to monitor the market constantly. It is not very comfortable, especially for people, who love active trading.
Secondly, in our opinion, using only this trading strategy wouldn’t be very wise, because got profit won’t be high. We would advise to use it in addition to your trading system. In this case you can increase the number of deals and profit. But we would like to pay your attention to keeping the rules of money management. Don’t overload your deposit, and if you enter the market with several deals, you shouldn’t forget about the fact that maximally available risk is run to all open deals. We wish you successful trading and big profits!
For trading strategy “Complete fading” we can use classical binary options, which in many web-terminals are called «Hi-Low». That is, we don’t need to reach by the price of strike level and we will bet on simple increasing and decreasing of asset price for certain time.
As you see on screens, we made identification of trading signals on timeframes H1, that is one candle is equal to one hour. It means that to let the price go enough for getting the profit distance after the signal of entering the position, we should choose the time of expiration of binary contract, not less than 6 hours. Don’t be afraid of high expiration time. Such terms are good because in this case options paying outs increase, but timeframes have less number of false deals entries.
Profitability of considering trading strategy showed rather stable results during its three-months testing. For every loss deal there are about 3-4 profitable deals, it is very good. But binary options profitability, with expiration time more than 6 hours, reach 150%. That is with beginning lot in 100USD for every three profitable deals, we will get 450-600 USD of profit, and only 100 USD of loss.
If you have good profitability, it is not worth weakening different parts of your body, especially grey cerebral hemisphere in your head. Don’t be greedy and put the size of a deal about 5% from deposit volume. Such safety tips are very important, taking into account that from time to time the market can offer you unpleasant spots of quotations chart, speaking about losses, where the number of losses can be 3-5.
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