Wednesday, November 19th, 2014 by Tim Lanoue
Finding the right technical indicator to use in a trading strategy can be difficult, especially when you are just starting out with trading binary options and have no little to no knowledge about the fundamentals of trading. The focus of this article today is provide all you novice traders, along with experienced traders, a highly effective 5 to 15 minute trading strategy. This strategy will require the use of two technical indicators which are extremely useful when trading reversals.
Simple Moving Average
As many of you may know by now the simple moving average is one of my favorite technical trading indicators to use when trading binary options. I take that back, it actually is my favorite technical indicator, as you may have notice I include this indicator in about every one of my trading strategies. This is simply due this technical indicators amazing ability to generate trading signals. There are three different types of moving averages: simple, exponential and front-weighted. All three of the moving averages differ from one another and provide different measurements and functions. For this binary options trading strategy we are going to use a simple moving average set at a period of 2. Meaning that we are seeing the average price of this asset during the past two trading days. Once that is done you need to change the offset of this indicator to -2 (negative two). In the picture below you can see an example of how to edit the period of this indicator and the offset of this indicator. The charting solution that I use as well is www.freestockcharts.com.
SMI Ergonic Oscillator
Oscillating type of indicators are a very effective trading indicator to use when trading with binary options. Oscillators are defined as an indicator whose sole value oscillate above and below a 0.00 level. The value of the indicator will indicate to us whether the asset is currently showing signs of being overbought or oversold. This is particularly helpful in our trading strategy because our strategy is based on trading reversals, depending on whether the value of the indicator is below or above the 0.00 level will dictate our type of investment. The indicator itself is not strong enough to use on it’s own in a trading strategy but when combined with other technical indicators it can be extremely effective. In the picture below you can see how to add this indicator to your charting solution if you were using www.freestockcharts.com as your charting solution.
The SMI Ergonic Oscillator Strategy
When using this high success rate trading strategy we want to make sure that we are trading an asset, preferably a currency pair, that displays relatively low volatility. Basically meaning that the likelihood that the asset will change directions due to minor market fluctuations is small to none. Some popular currency pairs that fit this criteria are as follows: Eur/Usd, Usd/Cad, Nzd/Usd, Usd/Chf and Aud/Usd. Once we have an asset or two selected we make sure that the time frames that we are watching our assets is set to 10 minutes. This is a 5 to 15 minute expiry trading strategy, this works great with the classic option style of trading which is offered by most brokers. Once you have done the above just make sure to add your indicators which is shown in the pictures above. In the picture below you can see this trading strategy in action.
As you can see the offset of the simple moving average indicator acts as a great way to predict future price action reversals. As like with most of my trading strategies, our simple moving average indicators acts as our signal generator. When this indicators crosses a candle of our SMI Ergonic Oscillator then we can look forward to part two of this strategy. So a cross has been established, the last step is to make sure that a confirmation candle appears above or near our cross. Sometimes a confirmation candle won’t always appear above the cross, it may confirm your reversal a candle or two later which is still alright. Any confirmation candles that don’t appear before two candles of the oscillator is a no trade. In the picture above you can see examples of our confirmation candles and where our arrows are indicates the type of trade we would place at that moment.
When our moving average line crosses our SMI Ergonic Oscillator indicator in an upward direction and we have a green confirmation candle appearing above the break within two candles lengths then we go ahead and place a CALL trade for 5 to 15 minutes. On the other hand, when our simple moving average indicator crosses our SMI Ergonic Oscillator indicator in a downward direction we have to wait for a red confirmation candle to appear above the break within our two candle lengths, once the following has been confirmed then we can place a PUT trade with an expiry time of 5 to 15 minutes.
This is a relatively new trading strategy that I have developed and I have found great success with it these past couple weeks. Out of 200 demo trades I have had 156 trades land in-the-money. Meaning I have had a success rate of exactly 78% these past two weeks. I have yet to try this binary options trading strategy with stocks but I see no reason for it not working. If you guys would trade this strategy with the currency pairs listed above along with test the following high volume stocks and let me know how you do would be greatly appreciated. Stocks to test trade: Apple, Exxon, Nike, Facebook, Twitter, Microsoft and Google. I would recommend testing these stocks on a demo account while trading from the currency pairs listed above in order to make a decent profit!
Thank you guys for reading and hope this trading strategy provides you with great success like it has done for me lately. This strategy can used by traders of all experience levels, whether you are new or a veteran trader the information provided to you in this article is all you need to know when using this trading strategy. As always guys if you have any questions, comments or suggestions please leave them below and with the results that you yield. Have a great day and happy trading!