The PVO Indicator Strategy for Binary Options

By | March 31, 2014

Monday, March 31st, 2014 by Tim Lanoue 

The PVO indicator otherwise known as the Percentage Volume Oscillator is a momentum oriented type of oscillator that falls under the category of a centerline oscillator.  The main function of the PVO indicator is to gauge and measure the difference between two simple moving averages in correlation with a large exponential moving average.  This indicator is particular helpful when trading stocks in the binary options industry because it deals with an assets volume.

How it Works

The Percentage Volume Oscillator has default settings so when you apply this into your charting solution you should not have to customize it to the preferences used in this article.  Default settings for this indicator involve the simple moving averages to be set at 12 and 26 while the exponential moving average is set at a period of 9.  These periods are used to measure time in days, so the first PVO line that is represented as the blue line below gauges the volume of the stock over the past 12 and 26 days.  While the exponential moving average, seen as the red line in the picture below, acts as our signal line.

 

How to Properly Apply

When using this indicator it is important to make sure that we are using a stock that has high volumes.  After all this is a volume and momentum type of oscillator so we are constantly measuring and gauging the health and overall status of our targeted asset.  Some high volume stocks that I would recommend to trade with this indicator would be Apple, PLUG, MRK, DTV, and FB.  In the picture provided below you can see how we would use this indicator to trades stocks in a binary options trading strategy.  As you can see we have an example of a call trade along with a put trade.  In order to place a trade we need to wait for two things to occur, the first thing would be we need our exponential moving average line to cross our PVO average line in either a downward or upward motion.  The last thing we need to make sure of is that the direction that our red line breaks with our blue lines correlates with the current trend above that break.  So in the first example you can see that our red line crossed our blue line in an upward direction and there was an overall bullish trend present so we go ahead and place a call trade.  The opposite goes with a downward break, if a downward break occurs then we need make sure a bearish trend is present and if so then we are good to place a put trade.  In addition, those yellow stars present in the picture display where our trades would have expire, as you can see they both are winners.

Best Expiry Times

When trading with this indicator we want to make sure that we are using a time frame consisting no less than 15 minutes and no longer than 30 minutes.  When we are using a 15 minute time frame we want to make sure that we are using a time frame consisting of one hour.  However, if we are using a 30 minute time frame then we want our expiry time to be near the two hour range.  The reason why we are using longer expiry times would be because we are dealing with high volume stocks and we need to make sure that the trend will more than likely continue.  If you have any questions you can feel free to leave them below, thank you for your time!

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