«Support-resistance» binary options strategy
Fans of technical analysis and the others, it is now your time to capture the market of binary options. Today we will review a trading strategy, which is purely based on technical analysis applied to option trading.
To begin with, let us note that there are levels from which the price of a financial asset bounces off. These levels are called support-resistance. At the same time, the skillful use of such important factors in binary options trading will bring substantial profits to traders. Moreover, the trade in this system is carried out with medium-term and long-term options with payout ratio up to 700%. That is, if one or two trades are negative, then profiting in the third and the fourth trade we cover the temporary losses and make profit.
We would like to mention, that the Grand Capital company MT4 terminal available for download here is needed to analyze the market as it has the required selection of technical analysis tools. Besides, you can use real-time binary options charts also containing technical analysis tools.
So, with this system, we will be trading the bounces from significant levels, which are to be searched for at the H4 chart of financial instruments. Let us take the currency pair GBPJPY tool as an example.
As you can see on the screenshot, price quotes of the pair, at the moment, are in a horizontal trend. That is, there is no clear increase or decrease trend in the market. At the same time, one can observe how the price bounced off support-resistance levels which could have been converted into profit with the skillful approach to binary options trading.
Let us review the following type of support-resistance level processing
As seen on the screenshot, the formed support-resistance level became a further level of price rebound for a considerable amount of time, which could have been used for trading One-Touch options for level touch. At the same time, to determine the exact point of executing the trade, we need to be supported by the Stochastic indicator value, namely by its turning towards the rebound.
Options trend trading based on support-resistance levels
Let us review trading with the trend. That means executing trades with One-Touch options in the direction of trend.
As you can see, the moments of price bouncing are clearly confirmed by the stochastic indicator lines turnaround, which, in most cases, leads to the good non-pullback move of the price and to the One-Touch options strike levels being reach.
What financial assets should be chosen for the bounce trading
As you can see, the example of the given strategy trade was provided for the GBPJPY currency pair, which is a volatility champion. However, there are still a lot of tools that can be used for this type of trading, whether those are stocks, indexes or commodities. The main condition for trading is the volatility of the selected asset.
In our case, we have reviewed the examples of the One-Touch option trades with the requirement for price touching the option specified strike level. However, for this strategy the Range option’s Out-Range subtype looking for the breakthrough of the price range will be appropriate, which in many cases, can protect the trader from false trade executions.
We have been reviewing the GBPJPY currency pair chart with the H4 timeframe. The price needed 3-4 days to reach the strike level after the bounce from the support-resistance level. With that said this trading is automatically related to middle-term type and we will need the contract’s expiration time of 5-7 days.
In case you are planning to trade middle-term classic binary options which have no strike-levels presented, then you would better test the system in the MT4 strategies tester or based on the quotes history. Don’t you know how to test the trading strategies? Please refer here.
PROFITABILITY OF THE STRATEGY
As one can see from the examples it is preferable to use options with longer expiration times of 5-7 days for trading. At the same time, our expectations will be rewarded by the fact that the profitability of such options is about 400%. Thus, investment of $ 100 will become a $ 400 net profit. This is despite the fact that there are not so many losing trades with this system.
If you have 4 profitable transactions in one financial asset per month, then using trading size of $ 100 you can earn more than $ 1,000 trading only one instrument. There are as many assets for such long-term trading as one may want. There are not less than five items. That is $ 5000 for 1 month of trading.
When executing trades you need to use 5% of the deposit. It means that you will need a deposit of not less than 2000$ to make 100 $ trades.
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