Friday, October 31st, 2014 by Tim Lanoue & Michael Freeman
Establishing a strong foundation before trading binary options by yourself is imperative if you wish to succeed in this highly profitable online industry. Today we are going to go over an in-depth trading strategy that I have spent many months trying to perfect and feel like I have finally done it. This strategy will require the use of an exponential moving average and the Ichimoku Cloud indicator which we will discuss in brief detail below.
Exponential Moving Average
A technically driven indicator that bares much similarity to a simple moving average indicator but more weight is added to the indicator to make it exponential. Commonly known as the exponentially weighted moving average this indicator has many duel purposes. One of the keen advantages of an exponential moving average is that is reacts to changes in market conditions quicker than most other indicators. Just like the simple moving average the exponential moving average works on a predetermined time period from a set number of days. In this strategy for instance the period that we will be using is 16, meaning that the line formed will show the average price of that asset over the last 16 days.
Ichimoku Cloud Indicator
Perhaps one of the least utilized technical indicators due to the complex sounding name the Ichimoku Cloud Indicator is one of the best indicators to use when trading binary options. However, just as the name may hint this indicator is kind of difficult to understand and does take a lot of practice to get use too. The main functions of this indicator is to determine price trends, spot support and resistance levels, and provide strong trading signals. In the picture below you can see all the intricate parts of this indicator and they come together to work as one.
Oftentimes the most overlooked aspect of a trading strategy would be the set-up. Sometimes the simplest mistakes in setting up can be the ultimate determining factor to whether or not your trade is successful or not. When setting up this strategy we want to use a low volatility currency pair or a high volume stock. A few popular low volatility currency pairs that we should consider trading would be the Eur/Usd, Usd/Cad, Nzd/Usd and Aud/Usd. Now some high volume stocks that we should consider trading would be Apple, Facebook, Amazon, Exxon and AMEX. Now that we have chosen a reliable asset to trade we need to make sure that the time frame upon which we watch that asset is set to a period of 15 minutes.
Implementation of the Ichimoku Cloud Strategy
Now that we have the proper set up we can work on applying this set-up into a highly profitable trading strategy. There are three main signal lines that we use; the red conversion line, the leading span a line and the exponential moving average line. The exponential moving average line is the main signaling line that we use, depending on the direction that it cross our conversion line or our leading span a line determines the type of trade we will place. In the pictures below you can see a few examples of strong trading signals and entries.
As you may have noticed, we place a call trade when our exponential moving average crosses our leading span a or merges with our leading span a line. Now in the pictures below you can see how a put trade is signaled and should be traded. When our exponential moving average line crosses our red conversion line then we go ahead a place a put trade.
All expiry times when using this strategy should be limited from 5 to 10 minutes, however 15 minutes trades still mostly end up in-the-money. I highly recommend using this trading strategy mostly with currency pairs because stocks can be a little difficult to trade sometimes if not during market hours. In addition, this strategy is best utilized during trading hours like the New York trading session, I don’t recommend this trading strategy during intra-trading hours.
This Ichimoku Cloud trading strategy is an extremely effective trading strategy that can be used by traders of all experience levels. Now practicing will definitely be a key to your success when using this trading strategy. When using this strategy successfully you can expect a success rate of 71% to 85%. During these past few months I have compiled a cumulative success rate of nearly 78% so this strategy can be extremely effective. As always guys if you have any questions or comments please feel free to leave them below and I will try to get back to you as soon as possible!