Friday, November 8th, 2013 by Tim Lanoue
In a constantly changing market the likelihood that someone will have an advantage over the markets is slim to none, however, if we traders stay hungry and keep increasing our vast knowledge about trading indicators and strategies then hopefully we can level the playing field some. With this in mind we are going to discuss a binary option strategy that has help many traders to significantly increase their success rate lately. The strategy is relatively simple to apply and the only indicators involved are two moving averages. One of the key scenarios we need to have happen before we think about implementing this strategy would be that our desired asset must have either a strong bullish or bearish trend. So if the asset you are analyzing has either of these two characteristics then you are good to go however if there is a neutral trend involved it is best to stay away, after all we are dealing with moving averages. For those of you who are unfamiliar with what moving averages are they are an indicator that takes the summation of all buy and sell orders over a certain period of time. The summation of these buy and sell orders make up the average component of this indicator while the time period chosen affects the line average over that period.
Moving Average Strategy – Explained!
In this strategy we have two moving averages set at 3 and the other set at 7. For those of you traders who like to place a good amount of traders per day this strategy is one for you. When using this strategy we want to use a timeframe of 5 minutes and have expiry times set for 5 to 10 minutes. This is a quick acting strategy that requires a decent amount of attention and fast acting trade entries. In the picture below you can see an example of this moving average strategy in action.
As seen above we have the Eur/Usd asset that is displaying a relatively strong bullish trend. Before we place any trades we need to wait for two conditions to be met, the first being that either a strong uptrend or downtrend be present. The second condition that must be met is that we need our two moving average lines to cross each other right on the outside of a candle or in the middle of the candle. An additional condition could be established if you want to play it safe and that is you can wait for a confirmation candle to appear before placing your trade, I usually do that except for instances like the second trade to the left where the two moving average lines crossed right aside the red candle. This moving average strategy is one that I made up myself and so far I have seen an average win rate of about 70% out of my last 400 trades so this is one to certainly try out.
If you have any questions regarding this strategy or trading binary options in general please feel free to leave a comment below.