Trading practice shows that in any market and assets (currency pairs, stocks, futures) up to 80% of transactions open on the trend end in profit. And for binary options signals with a predetermined expiration time, the presence of an explicit price direction is mandatory.
Let’s start by defining what a trend is:
- Uptrend or «bullish». Each next price maximum (top) and minimum (trough) is higher than the previous one.
Downtrend or «bearish». Each next max/min is lower than the previous one.
To simplify the analysis, trend lines are plotted on the chart after at least three max/min. Training courses binary options for newbies recommend opening trades only in the direction of the main trend.
A market without an obvious direction (lateral movement or flat) is considered unsuitable for binary options trading, with the exception of situations of fairly wide flat, at least 3-4 candles in one direction, when you can open short-term deals on a rebound from the channel borders.
Trade on the trend
For short-term options, the most effective strategy will be to open trades after the breakdown of the trend line and the subsequent reversal in the main direction. More or less like this:
When the first signs of a reversal appear, we open a PUT on a downtrend or a CALL on a rising trend. The duration of the transaction depends on the scale of the chart. The most reliable options are worked out, whose expiration period is at least 2-3 times longer than the period selected for trend analysis.
The larger the time frame on which you see a strong trend, the longer the trade should be.
Options Recommended: «CALL/PUT», «One Touch», «Boundary Out/In», «Stays Between/Goes Outside».
Counter-trending strategy for binary options
Trading on classical trends is beneficial only with a strong and sufficiently long movement, and the boundaries of the price corridor should be close to each other. Such narrow corridors are rarely found in the real market and a different approach is needed.
Most of the time price is trending in a fairly wide price range, do not miss such movements. Additionally, the strategy against the trend can give a profit and in a broad flat.
Special requirements are imposed on the construction of a price channel, and it does not have to be parallel (for example, when forming a graphic figure of the Converging Triangle). Transactions are opened both when they break away from the borders, and from the middle of the channel in both directions, but the priority trend (if it is available) must also be controlled.
A signal to open a CALL option will rebound upwards from the bottom of mid-channel for PUT-option – top-down from the top edge of the middle. With the right approach to money management, countertrend strategies give 7-8 profitable binary options signals out of 10.
Moving average as a basic trend indicator
The reliability of the most popular Moving Average (MA) indicator is ensured by the concept of the average price value for the estimated period of time. It is the moving average that most accurately tracks the direction and strength of the trend on the price chart: if the average looks up, the trend up it moves down, it falls. The benefits of the Moving Average movement indicate the strength of the trend – the larger it is, the longer the movement.
In binary options trading, moving averages are used as a regular trend line, that is, a signal to open a transaction will be either a breakdown of the line followed by a reversal or a break from the moving average line with the continuation of movement along with the main trend.
One moving average for an accurate binary options strategy is not enough due to a delay relative to the current price. Combinations of “short” and “long” averages are used to improve signal accuracy. The number of billing periods depends on the characteristics of the trading asset. The most reliable are the pairs in which the periods differ by 5 or more times, for example, SMA (5) + SMA (20), SMA (10) + EMA (50), SMA (20) + SMA (100).
The strongest signals are obtained when the average crosses the faster one: from bottom to top – the CALL option, from top to bottom – PUT. But a rebound from the “long” average in the direction of the main trend is also considered as a trading signal.
When calculating expiration time of an option on the Moving Average combination, you need to view a history of quotations (on timeframe period) and analyze moments of crossing lines of such averages for a long period (at least 3-6 months). You need to find an average number of candles between the intersection points that were in a profitable area for the transaction.
Options Recommended: «CALL/PUT», «Boundary Out/In», «Stays Between/Goes Outside».
Ichimoku Binary Options Trading Signals
The Ichimoku indicator is a comprehensive trend trading system that works equally profitably on all financial assets. The analysis may seem difficult for beginners, but thanks to lines with completely different properties, you can “catch” a lot of trading signals. On the chart, Ichimoku looks like this:
The Ichimoku indicator is in all popular binary options platforms and at the same time shows several types of trend: short-, medium- and long-term movements. This allows you to accurately calculate the expiration time without complex analysis.
As long as the price moves in the cloud (or near it) – the market is in a lateral position (flat), and its boundaries will be dynamic resistance/support levels. If price moves above the upper border of Kumo, the trend goes up, if it goes beyond a lower border, it is bearish. Tenkan-sen line is considered the same trend indicator.
Kijun-sen line shows the probability of a trend change. The intersection of this line of the price chart means a near reversal.
- First signal. The Chinkou Span line breaks price chart: from the bottom – top, opens the CALL option, from top-bottom – open PUT option.
- Second signal. The Tenkan line leads Kijun-Sen from bottom to top (Golden Cross) – open CALL-option, if from top-bottom (Dead Cross) – open Put-option.
- Third signal. We reason the same way: crossing the Senkou-A line with Senkou-B line from bottom-up is CALL-option, from top-down the PUT-option.
The strongest binary signal is a breakdown in the price chart of Senkou-B lines, and Chinkou-Span. This can be used to open the “grid” of options in the direction of a strong trend.
The Ichimoku indicator works best on periods M30-H4, on shorter periods Kumo lines will be most accurate. On timeframes from D1 and higher, signals from trend lines are better.
Options Recommended: «CALL/PUT», «One Touch», «Pairs option», «Boundary Out/In», «Stays Between/Goes Outside».
Let’s summarize. Profit from trend trading depends on the accuracy of the analysis and the correct expiration time – at least 3-5 periods of the timeframe. Therefore, you need to look at how binary options signals work on a demo account before using it for real trades.