Fence Trading Strategy for Binary Options


Thursday, January 2nd, 2014 by Michael Freeman


The Fence Trading Strategy, also known as ‘Double Profit’, allows traders to increase the ITM payout and minimize the potential OTM loss. The ideal situation for Fence Trading is when the asset’s price bounces up and down within a reasonable price range allowing us to enter into two opposite trades and as close as possible to the highest and lowest prices on the asset’s chart. By creating a wide enough range, we can increase the probability to win both trades and get double the ITM payout, hence the term ‘Double Profit’.

At the highest price level within the ‘Fence’ we enter a PUT prediction while at the lowest price level we enter a CALL prediction and our goal is to ensure that the asset’s closing/expiry price is between the price levels of the upper and lower trades.

Fence Trading Strategy Example

Let’s say that the price of Asset A is currently $25, yielding a %75 ITM return and a %0 OTM return. We decide to invest $100 predicting a price increase upon expiry which is set at 60 minutes. 20 minutes later the price of asset A  reaches $30, based on the neutral trend we assume that the price will close below $30 and we invest another $100, predicting a price decrease. At this point we entered a Call and a Put predictions creating a “Fence” between $25 and $30.  If the final asset’s price(expiry) falls between the the lowest and highest price levels, we will get the highest return on the investment formulated in the first example below.

Asset A expiry =$25-$30 ($100+$75)+($100+$75).

Initial Investment = $200, Ending Balance = $350, Profit = $150.00

 

Asset A expiry > $30 ($100+$75)+($100-$100).

Initial Investment = $200, Ending Balance = $175, Loss = -$25.00

 

Asset A expiry < $25 ($100-$100)+($100+$75).

Initial Investment = $200, Ending Balance = $175, Loss = -$25.00

The obvious conclusion is that with the Fence Trading Strategy we can significantly reduce the loss on OTM trades while doubling the potential profit! The profit on winning trades is 6 times higher than the potential loss ($150 vs -$25) which means that even if we lose a few consecutive trades we will still take back more profit over a volume of trades. This is definitely a winning binary options strategy!

 

fence

 

Fence Trading and Bollinger Bands®

Now that we understand the great potential behind Fence Trading, it’s important to learn how we can properly identify a neutral trend while spotting the ‘right amount’ of price volatility to indicate a safe entry point so we can safely utilize this binary options strategy. The Bollinger Bands are used as a technical analysis indicator allowing us to measure the current price volatility for any underlying asset. The volatility bands are positioned above/below the moving average line, forming a range that is constantly adjusted depending on the market volatility, making it an ‘ideal indicator’ for Fence Trading. The visual representation of the Bollinger Bands is used to predict the ideal ‘lowest and highest’ entry points and confirm the presence of a neutral trend for the current time period displayed on the asset’s chart.

The Bollinger Bands are available Free on Meta Trader 4 and FreeStockCharts.

Fence Trading combined with Bollinger Bands make up a very solid strategy. It’s also suggested that you set the expiry for one hour, giving yourself enough ‘response time’ to enter the 2nd trade. Remember that binary options involves high-risk, therefore any strategy that attempts to minimize the potential loss will ultimately minimize the risk and allow you generate more profit! Before you ‘jump in the water’ head first with $100 trades.. make sure to put the Fence Trading Strategy to the test with lower trade amounts or on a demo account. For brokers offering low trades amounts and a demo account visit the Recommended Binary Options Brokers reviews.

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32 Responses to “Fence Trading Strategy for Binary Options”

  1. darryn Says:

    hi micheal,

    good strategy, i will have to try it.
    1. whats the win rate of this strategy ?
    2. what do you do if it reverses, for an example you put when it goes through the roof and it keeps going.
    is it better to wait it out till it comes down and risk it or do we call straight away and take the loss which is minimal.
    3. is it best to have our expirey time on both assets close the same time or very close together ?

    i can see this strategy being very profitable if implemented rightly. keep up the good work bro.
    out of all the stuff i read i have to say you have the most knowledge or trustworthiness.

  2. Michael Freeman Says:

    Hi Darryn,

    The potential risk when using ‘Fence Trading’ alone is if the price reverses and for this reason it’s really important to use Bollinger Bands to predict the price volatility, ensuring that the trend is neutral and the price won’t go into an Up/Down Trend. The expiry must be the same for both trades and I recommend setting the expiry for an hour, this will give you the ‘response time’ needed to safely enter two trades at the lowest/highest points possible. If you plan to trade on 60 minutes, you should place Bollinger Bands on a a 3-4 hours or daily chart and it will visualize the price volatility for you, once you recognize a neutral trend, you can set the expiry on your broker’s platform for 1 hour and enter your 1st trade, about 10-20 minutes later you can enter the 2nd trade on the same 60 minutes chart.

    Checkout the article on Bollinger Bands before you get started. Even if a trend seems neutral, it’s not always the case…which is why it’s important to use a volatility indicator.

  3. darryn Says:

    hi micheal,

    i forgot to ask you if this strategy could be used for 60sec ?

    i dont use 60sec but it may work or even the 5min options.

    im thinking if you are quick enough and there is a constant trand, so maybe you have to find the trends.
    would be good to know if you have applied this method to 60sec ?

  4. Michael Freeman Says:

    Hi Darryn, It’s not a good strategy for 60 seconds because the price of an asset is too volatile and unpredictable on a very short time-frame, the price movements do not represent a real trend over 60 seconds.. 15 minutes is the shortest expiry I would use so if you decide to trade on a 15 minutes expiry, you can confirm the price volatility with Bollinger Bands over 1-3 hours and determine if the trend is neutral enough to safely implement this strategy. Cheers! Mike

  5. Tobias Says:

    HI Michael,I think get the idea but I do not understand the description.

    We want the price to move from top to bottom and back in the same 60min , don’t we have to look at a lower time frame like 5 min?

    Thanks.

  6. Michael Freeman Says:

    Hi Tobias, thank you for the comment. Identifying a trend is easier when looking at the “macro”, by extending expiry further. Over a period of 60 seconds or a few minutes the graph might appear to be going into an uptrend or a downtrend, however if you look back at the last few hours, the picture might be completely different and this is because price movements over a short period of time ONLY represent the affects of buyers/sellers caused by by buying/selling on a midsize/low scale while a steady trend over a few hours represents bigger ‘trend creating factors.’

    Also, let’s say you’re looking at the 5 minutes chart, and you notice a very precise looking ‘up-trend’, you switch the graph to 1 minute, you will probably see the same thing. However, if you switch the graph to 4 hours and notice a completely different trend, what would you count on if you plan to trade on a 60 minutes expiry? The answer is; on the 4 hours graph because it represents a much bigger picture, a trend that can be reasoned and reserve engineered while during the 5 minutes it could be that there were more buyers than sellers causing the trend to shift for a few moments, however the overall trend will resume the direction in which it is going until something bigger happens in the market.

  7. Tony Mills Says:

    Michael,
    Nice strategy I really want to get my head around it. You say to look at a higher timeframe to see the overall trend but what timeframe do we want to watch the actual movement so we know when to enter the trade and 20 minutes later see that it has reached the other end of the BB so now enter the other trade?

  8. Michael Freeman Says:

    Hi Tony, I personally set the expiry for 60 minutes and wait around 15-30 minutes before entering the 2nd trade. Also checkout the article on Bollinger Bands and if you have any questions on how to set the indicator let me know! Give yourself time to practice with smaller traders and or via demo account, once you get the idea and start doing it right, I can guarantee that you will see an improvement in your ITM success rate! By the way, if you are looking for a %100 free demo, checkout my PowerOption Review, they are only available in about 20-30 countries but if you are able to access the platform, I would register a new demo account with them. Cheers! Mike

  9. Tony Mills Says:

    Hey Mike, I think I get it now need confirmation. You’re saying to set the BB on a 4 hour chart, when the 4 hour chart is ranging and price on the 4 hour chart is at the top of the BB initiate a put option with a 60 minute expiry, then 20 minutes later assuming the price has infact moved lower implement a call option. So there is no other timeframe you’re looking at for this process, just the 4 hour, correct?

  10. Michael Freeman Says:

    That’s %100 accurate. If you plan to trade on 60 minutes expiry, the best chart for the analysis is the 4Hr chart. The 2nd trade should be entered about 15-25 minutes later. If you are not sure if you got it right, give it a test run on a demo account or with lower trade amounts. Cheers! Mike

  11. Tony Mills Says:

    What time of the day is best to trade this strategy?

  12. Michael Freeman Says:

    The time doesn’t really matter, what you need to do is verify a neutral trend by observing a 4-hrs chart if you plan to trade on a 60 minutes expiry before you step into the first trade.

  13. Kieran Shirey Says:

    Hi Mike. Nice strategy. I think I want to give it a try. Total newbie to Binary Options so will demo until I feel good about it.
    Would it be useful to also use a Stochastic indicator as well?
    Also, are you planning on doing a video to demonstrate this strategy?

  14. Michael Freeman Says:

    Thank you for the comment. The Bollinger+Fence is a great binary options trading strategy. On the Charts and Indicators section you will find more information on Stochastic Indicator, it’s up there with Bollinger Bands in terms of popularity. Both are available free on Investing.com, Free Stock Charts and Meta Trader. Two weeks ago I opened a new account with TitanTrade and I plan to upload a new series of live trades, in the past I uploaded live trades via Anyoption and GOptions, I think it’s a good idea to record a full trading session and implement this strategy in a video. In a previous video I demonstrated the Double Profit, ‘fence trading’ strategy on the Anyoption platform and I included a playlist on my channel. Anyway, I strongly recommend this strategy. If you have any other questions don’t hesitate to leave a comment. Cheers! Mike

  15. SamanthaMarvel Says:

    Great Strategy Michael! I’ve been following your blog and YouTube channel for months and this is one of the best strategies you came up with. Keep up your great work!

  16. Michael Freeman Says:

    Hi Sam! I really appreciate your comment! Stay tuned for more and if you have any questions you are welcome to email me at anytime! Cheers! Mike

  17. Adam Says:

    You look at the 4 hour candlestick chart for Bollinger Bands to be parralell and watch the 1 hour price action chart at you broker’s platform to identify the up and down patterrn? Please confirm.

  18. Michael Freeman Says:

    Exactly. Also checkout my latest video on Bollinger Bands https://www.youtube.com/watch?v=CL6tqsqukzA

  19. azar Says:

    Hi Michael,

    Thank you for the strategy. I will test it right away.

    Thanks for information and videos.

    Regards,

  20. Kaid Says:

    Hi my broker platform only has 10 minutes trades can the fence and bolinger strategies be done in this time frame what time frames would I use for charts ie when to put first and second trade within ten minutes is this possible thank you in advance Kaid

  21. Michael Freeman Says:

    Which broker are you trading with? 10 minutes expiry should work but I usually recommend going with a 30-60 minutes expiry, it’s safer when using BB.

  22. Jock Litterick Says:

    Hello Michael, Just come across this video today. If I can I would like to go through what my mind is telling me.
    1, Wait for a ranging market as shown on a 4 Hour chart.
    2. Wait for the last candle at the Bollinger range and trade at beginning of next one.
    3. After +- 25 minutes, place an opposing trade.

    The objective is to have a trade at the outer limits of the each range

  23. Lee Alexander Says:

    I want to thank you for this link! When I am ready to begin trading again it will be very usefull. I need to learn more first. Once again, Thankyou Michael!

  24. Jay Kim Says:

    Seems like an awesome strategy to apply fence trading with binary options. I’m going to give it a shot. Hopefully I have a lot of success. Thanks Mike!

  25. Burnsey Says:

    Hi Michael,excellent strategy.
    6:1 Risk reward in our favour.
    Very interested in barrier trading,sometimes called tunnel trading.
    The opposite to this strategy.
    You create a barrier the wider the better and if the price touches the barrier either top or bottom you get paid.
    For High volatility markets.
    Trading on price ,the news,triple witching,us farm payrolls etc.
    A video on tunnel trading would be brilliant…….

  26. jay king Says:

    hello mike i sent you a rather long email last night. i just read through all of yours and peoples comments. i can’t make any sense of it. i’m terribly confused. i have to disclose to you my mental health issues which i think are getting in the way. i have bi-polar disorder and all that comes with it. i also have acute anxiety as well. i want to learn how to turn this last $400 i have into my rent money and my immediate bills. services are starting to turn off now (the cable…the computer will be next, then my cell phone..etc.) i’m feeling a little slow today (depressed) and i wanna figure this out. but its hard and i don’t want it to be. can you help me find a simpler or anybody. i’d be willing to share my earnings for 2 weeks while i learn. i just need help..

  27. Michael Freeman Says:

    Hi Jay, I am really really sorry about yesterday. I got caught up with so much work and wasn’t able to respond to all emails. It was a very busy day for me but I have your email now and I will make sure to respond asap. Give me an hour and I will get back to you Jay. Have a great weekend! Mike

  28. serge Says:

    hi mike i have sent you a email for get more information on fence strategy

  29. Michael Freeman Says:

    Got it! Give me a few moments and I’ll reply to your email. Cheers! Mike

  30. epicallyfun Says:

    I’d be willing to try this out for 60 minutes, seems like a decent method. Thank you for sharing!

  31. Dennis Mason Says:

    I just found out about your group, videos and so forth. This is the first post I have read and Wow. Such a simple yet brilliant strategy. I have been demoing and trading small amounts for about 7 months. I am so happy to be here!

  32. Michael Freeman Says:

    Thank you so much Dennis!! I really appreciate it and glad you’re loving our group! I am really proud of this project and glad to see that we’re growing and members are happy. 🙂 Cheers! Mike

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