Basics and Implementation of the SMI Ergodic Indicator
Thursday, February 20th, 2014 by Tim Lanoue
Establishing an edge in the binary options industry can be a difficult task especially when our priorities are set on profiting with online trading. Many new traders who lack fundamental knowledge and motivation often fall prey to the trading market causing them to lose most if not all their trading funds. Spending hours of research, constantly gaining experience, using proper strategies and a bit of luck will dictate how well you do as a trader. The purpose of today’s article is to provide fundamental knowledge to a technical analysis indicator and how to use it in a trading strategy discussed below.
Established by William Blau, the SMI Ergodic indicator is similar to the True Strength Index (TSI) indicator and is often used in conjunction with a trend or momentum oriented trading strategy. One of the unique features displayed by this indicator is that it is composed of two moving averages set at a period of 5 and 20 and can be seen as the red line in the picture below. The main function of this indicator is to determine whether the value of an asset is overbought or oversold. This indicator is meant to serve as a trend trading indicator and is just as effective when used with momentum trading strategies.
Using the SMI Ergonic indicator as part of a binary options trading strategy is relatively simple and the signals generated from this indicator tend to be strong and accurate. For this trading strategy I only use one other indicator in combination with the SMI Ergonic indicator and that would be an exponential moving average set at a period of 5. When using this strategy we want to make sure that we have reliable assets that display relatively low volatility because this is more of a trend trading strategy. Common assets that reflect low volatility behavior would be the EUR/USD, Oil and Exxon. The last thing we want to make sure of before we apply this strategy is that the time frame we are watching our targeted asset is set on 15 or 30 minutes. Any other time frames used can effect the accuracy of our trading signal. In the picture below you can see an example of how this strategy is applied.
Many people claim that trading online with binary options is a walk-in-the-park often providing novice traders with the thought that they can make a large amount of money in a short amount of time while trading binary options. Unfortunately for them about 80% of newbie traders will not succeed in this online trading industry which is why we need to constantly improve our knowledge and implement new strategies for when times are rough. The SMI Ergodic is a great technical analysis indicator that can boost your winning percentage when used in combination with other trading indicators and strategies. If you have any questions or comments feel free to leave them below.