We have often pointed out that binary options trading is primarily designed for short-term trading. This, in turn, can best be accomplished with the help of technical analysis. An important rule for short-term trading was: Analyze the course action with an alternative platform or software, since the offer for the technical analysis on the part of the brokers is still quite rare at the moment. Since binary options trading is still in its infancy as a trend, this may change in the near future.
But how do you implement a strategy that is mainly based on technical indicators? We would like to illustrate this with an example today.
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Trading strategy for binary options with Bollinger bands and The Williams% R indicator
We today are trying to build a strategy based on technical indicators. Every trader should check in advance whether any news or economic indicators will be published in the next few minutes. Because then there is a great risk that these messages will disrupt the reliability of the signals. What we do with the use of indicators is the identification of consistency within a short period of time in the price movements. For example, if we have a sideways phase, the consistency is that the price bounces off the same support or resistance several times. We can take advantage of that.
Binary options strategy for short-term trading: 5 steps to trade
Although trading is always associated with risk, a well-thought-out strategy can contribute to that Increase the chances of success. But what should retailers pay attention to? How can traders prepare as specifically as possible and still get to the first trade without detours? We have summarized the most important facts in the following slideshow - these five steps easily lead traders to the first trade:
The "Bollinger Bands" were based on statistical calculations and developed by John Bollinger. The idea behind it is the normally distributed fluctuation range. The upper and lower moving averages reflect the roughly expected limits that result from calculating the volatility of the price within a certain period. If you want to know exactly, Wikipedia tries. There are several strategies to successfully use Bollinger tapes. On the one hand, the limits can be used to identify turning points, which we will do. On the other hand, narrowing Bollinger bands can indicate a jerky price movement. However, the direction is usually not quite clear. Let's take a look at the whole thing in the 1-minute chart. We can clearly see how the exchange rate of the Usd / Jpy currency pair moves within the Bollinger bands. That is certainly not unusual, because he cannot move otherwise. What we are looking for are possible buy or sell points for binary options. If we want to make it easy for ourselves, we can always speculate on a bouncing off at the lower or upper limit. But it usually looks easier than it really is. Because the Bollinger Band moves with the price and not the price with the Bollinger Band.
So we need a filter to ensure a certain reliability and to lower our trading frequency somewhat. Because honestly, even if you wanted to take every chance based on the 1-minute chart, it would be almost impossible. You should also avoid it, otherwise you will fall into a gamble and squander your capital. One of the important rules is that planning is essential in trading. We can therefore use another indicator as a filter. At this point, it should be said that there is an abundance of filter indicators and that many traders have their own preferences. Don't be afraid to try some. We will use the "Williams% R" indicator for our example.
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Long Term Binary Options Strategies
Williams% R indicator
Like the name already says the Williams% R indicator was developed by a not-so-well-known commodity trader (Larry Williams). The indicator belongs to the category of oscillators and indicates the relative ratio of highs and lows to the opening and closing prices of a specific period. In this way, overbought and oversold situations can be identified. So if we use this indicator as a filter, we get better signals, and we do that by saying that we only buy or sell places at the Bollinger Band boundary when the Williams% R indicator is either in the overbought or oversold area.
The standard settings for these zones are -80 and -20. However, you can take narrower values here. For our example, we have set -90 and -10 to increase reliability. The example clearly shows how the two indicators work together to manage binary options trading. Another advantage of the Williams% R indicator is the identification of so-called divergences between the price behavior and the indicator. In our example, these zones are encircled. Strictly speaking, you should always pay attention to situations in which the price continues to go up or down, but the indicator has already taken the opposite direction. Here, the weakness is noticeable in the price movement, which at first glance is strong. Another advantage of the Williams% R indicator is the identification of so-called divergences between the price behavior and the indicator. In our example, these zones are encircled. Strictly speaking, you should always pay attention to situations in which the price continues to go up or down, but the indicator has already taken the opposite direction. This is where the weakness becomes apparent in the price movement, which at first glance is strong.
If you want to filter even further and only make these trades, then choose a somewhat longer-term binary option between 5 and 15 minutes. Therefore, choose a binary options broker that gives you the choice for the life of an option. For example, the broker. It even offers its own charting software for analysis for download. If this software has integrated the common indicators, to which the two presented definitely belong, nothing stands in the way of your successful trading in binary options. At least as far as the technical analysis is concerned.