«Trading the trend» binary options trading strategy
Any professional trader can confirm that trading against the trend is "the road to nowhere". At the same time, there is a "the trend is our friend" proverb confirming the fact that the trend is necessary to become friends with. That is, it is necessary to trade exclusively in the direction of the trend.
There are two ways to determine the trend:
- with the help of trend indicators;
- with the help of visual analysis using the trend line.
Once you have the terminal installed to your personal computer, your binary options trading via the usual browser-based terminal becomes a few quality steps better. Since, from now on you will be able to execute trades not based on intuition, but rather with the help of wonderful tools for technical analysis, which can be accessed at any time of the market asset uncertainty.
So, we have the MT4 terminal in front of us with the currency pair GBPUSD taken as an example.
Then we select the “trend line” tool and draw it connecting the price chart support lines.
We determine the trend direction with the help of this line.
«Trading the trend» binary options trading strategy. Rules for executing trend trades
We have drawn a trend line, according to which, we have determined that the trend is up, and it means that we only buy binary options at this stage. However, when do we execute a trade? It is of course logical to enter when the prices bounce up from the trend line. However, it all looks nice on historical charts, though in reality it is difficult to determine exactly when this rebound has occurred. We need to use additional tools to confirm the rebound; the classic Stochastic oscillator will be the one.
As you can see oscillator is in constant move and confirms the moments of price bouncing from the trend line.
When should we enter the trades?
We enter the market with binary option when the price of an asset touches the trend line we have drawn and the stochastic indicator being in the oversold zone turns around and starts to move beyond the given zone. This is the best moment to buy.
As you can see on the screenshot, in all cases, a real bounce from the level is confirmed by Stochastic indicator. That is, the price was on the trend line, the indicator turned around and moved up and at this time we execute a binary options trade and after a while we make profit.
We can apply the classic binary options for which it is not important to achieve strike levels and the profit is from 70% to 85% for binary options trend trading.
You can use the One-Touch options with established strike levels. At the same time, as seen on screenshots, the price of the asset always covers the required strike distance after bouncing from the trend line. Usually, the payout for the specified type is up to 150% -600%, depending on the time of expiration and strike level height.
Also the stated strategy can be used for «Range» options trading with the Out-range condition, which means the price’s movement beyond the price channel range. Payout for the specified type of options is up to 150% -600%, depending on the time of expiration and the height of the strike levels set for breakthroughs.
Which financial asset to choose
For trend trading we can choose any financial asset that has a clear trend at the beginning of trading.
For example, a down trend has been immediately identified on the random charts for GBPJPY and GBPCHF currency pairs at which we can sell binary options with confidence at the upper trend line retracement.
However do not forget to use stochastic oscillator for confirmation. It will save you from selling early.
You should select classic binary options, RANGE options and ONE-TOUCH options with 6 hours and 12 hours expiration times for the stated type of trading. That is the approximate time an asset needs to reach the strike levels resulting in profit.
Trade size when trend trading should not exceed 5% of the size of your deposit to exclude the unplanned drawdown. Thus, if you have a minimal deposit of 200-250 USD, then the size of the trades must be no more than 10-15 USD. An additional factor that will play into our hands is an increased amount of payout for «Range» and «One-Touch» binary options, which can generate USD 50 of net income for each 10 USD invested that is more than an excellent result.
On this, let us finish the review and wish you profits!
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