Wednesday, October 22nd, 2014 by Tim Lanoue
Update (March 2017): We’ve just uploaded a revised VWAP Strategy post!
Having a solid trading strategy is imperative if you wish to succeed while trading binary options. Whether your strategy be fundamentally or technically based you must have a solid game plan in mind if you want to take on the financial markets and succeed. Today we are going to take a technical approach for taking on the financial markets and it involves the use of two binary options indicators.
These two indicators are known as the simple moving average indicator and the volume weighted average price indicator, moving forward we will cover the basics, setup, and implementation of this simple yet highly effective trading strategy. As many of you may know by now I am quite the fan of moving average indicators due to their incredible ability to signal possible trading entries. For those of who you are not familiar with moving averages it is a technical indicator that has the main function of predicting price reversals. Now the unique characteristic about moving average indicators is that they can be set to reflect different price averages over a certain duration of days, this average is based entirely on your desire but for the sake of this strategy we will be setting our simple moving average indicator to a period of 4. Meaning that we will see the average price of the targeted asset over the last four days.
The other technical indicator that we will be using in this shortterm trading strategy would be the VWAP indicator, otherwise known as the Volume Weighted Price Indicator. One of the main functions of this indicator is to predict bearish and bullish market conditions. This plays in great strengths when paired with our moving average indicator because they both predict future price reversals which is what our strategy is based upon. Setting up the VWAP indicator further more we need to set the time frame to 5 minutes. Next, it basically is adding your indicators to your charting solution and editing the moving average to the desired time period of 4. When using this strategy we want to make sure that we are using reliable assets such as low volatility currency pairs and high volume stocks. Some of these reliable assets are listed as follows: Eur/Usd, Usd/Cad, Nzd/Usd, Apple, Nike and Exxon.
Now that we have a proper set up we can focus on the more complicated part of this strategy, the implementation. Looking in the picture below you can see that we have the Eur/Usd with a time frame of 5 minutes with 10 different trades placed. Moving forward, if you couldn’t tell, our VWAP indicator line is our signal generating line, once the VWAP indicator crosses with our moving average indicator then we are signaled. If our VWAP crosses our moving average line in a downward direction then we place a shortterm PUT trade with an expiry time of 3 to 10 minutes and vice versa for upward crosses. Now you can wait for a confirmation candle to appear next to the cross but it is not necessary, in all the trades placed in the picture you can see that I did not wait for a confirmation candle to appear, this still resulted in 90% inthemoney success rate.
Trading with technical indicators along with a fundamentally sound trading strategy will determine your success as a trader. The strategy described above is quite simple and offers a high success rate making it ideal for traders of all experience levels to utilize. As always guys, if you have any questions or comments please feel free to leave them below!