Monday, November 17th, 2014 by Tim Lanoue
Trading stocks can be a risky business venture to take on however if you have a technically sound trading pattern then your chances of succeeding highly increase. Trading stocks with binary options can be quite rewarding but at the same time it can be difficult. Luckily for us with binary options we don’t have to worry about any pip spreads we simply have to predict whether the price of the stock will increase or decrease from it’s current level. Today we are going to cover a great stock trading pattern that requires the use of only two technical indicators.
As you may have guessed, one of the indicators that we are using would be a moving average. However, the moving average indicator that we will be using is known as a Front Weighted Moving Average. There are three different types of moving averages: simple, exponential and front weighted. These three averages have different characteristics and functions. The purpose of the Front Weighted Moving Average would be to add more weight to moving average which can be used to determine hard reversal points.
The second indicator that we will be using is the Ease of Movement indicator. The Ease of Movement indicator is a rather unique technical indicator that I do not believe I have covered in any previous article. The main function of this indicator is to show the relationship between the asset’s price action and it’s volume. Not only does this indicator show us the relationship between those two factors but it also helps us see if the asset is currently overbought or oversold. This is a great benefit for us because the whole purpose of this trading pattern is to trade reversals.
When using this pattern we will want to make sure that we are trading with high volume stocks, and preferably during market hours. I highly recommend using this trading pattern during the New York trading hours and with the stock Apple. High volume stocks that should be considered are as follows: Apple, Exxon, Nike, Amazon, Twitter, Facebook, BAC, and Comcast Corp. Now that we have chosen a reliable stock to trade we need to make sure that our time frame is set at 15 minutes. Next we add the indicators to the charting solution. Once you add both, right click on the moving average indicator, select Edit, Change the Period to 2, and Change the Average type from Simple to Front Weighted. Once you have done all that we can wait for our signals to generate. In the picture below you can see an example of this pattern in action.
The signals generated are easy to see and extremely effective, as you can see 4 out of 5 trades ended up in-the-money. When using this trading pattern we wait for two occurrences to happen, first would be a cross between our moving average line and our Ease of Movement line. The second occurrence would be for both of those lines to cross the dotted line, once it does then we are good to place a trade. When our moving average line crosses our Ease of Movement line in a downward direction along with both of our lines crossing our Ease of Movement 0.00 level within 2 candles lengths then we are good to place a 5 to 15 minute trade and vice versa for the opposite direction.
For Binary Options Indicators covering 60 seconds to daily trades, visit the recommended Binary Options Indicators and Trading Patterns page.
Trading stocks with binary options can be difficult for traders of all experience levels. Luckily for us, this trading pattern is simple to use and highly effective. Make sure that you have the right set up and be patient for the signals to come. Like always, if you have any questions, comments or suggestions please feel free to leave them below!