VWAP Indicator and Trading Pattern for Binary Options

By | October 22, 2014

Wednesday, October 22nd, 2014 by Tim Lanoue

Update (March 2017): We’ve just uploaded a revised VWAP Trading Pattern post!

Having a solid trading pattern is imperative if you wish to succeed while trading binary options. Whether your trading pattern 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 pattern. 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 trading pattern 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 pattern 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 pattern 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 trading pattern 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 pattern, 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 pattern will determine your success as a trader. The pattern 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!

14 thoughts on “VWAP Indicator and Trading Pattern for Binary Options

  1. Janet

    i cant seem to download the freestock chart can you use a moving average with 2 value?

    Reply
  2. Dana Pratt

    Hello, I can’t see your illustration. Can you send it to me? Also, I wanted to know as soon as the the VWAP crosses the moving average, do I place my trade then or do I wait until the candle closes?

    Reply
  3. Jose

    Hi Tim, Thanks beforehand for your suggestions about binary options trading. One thing you don’t mention is the VWAP setup, the MATicks parameter, I’ve been playing a little bit with it, but I would like to know the one you use to get the described results, on the other hand I can’t find the way to download the VWAP from the link you say, as far as I can see there’s no way to download it. I got it from a different source with a default setup of 1000 and I needed to adjust it in order to get some close but not exact, to your graphic above. Thanks in advance.

    Jose

    Reply
  4. Tim Lanoue

    Damion: You will more than likely have to buy the indicator to add to your charting solution, however, I know the indicator is free on freestockcharts.com.

    Jan: Ideally during market hours, I prefer the New York trading hour sessions over intra-trading sessions. The markets are much more reliable during trading hours

    Hope this helped guys!

    Tim

    Reply
  5. jan

    when is the right market time to perform this? or doesn’t it realy matter?

    Reply
  6. Tim Lanoue

    Rene: IF you are wanting to use this strategy strictly for a longer time frame, then I would indeed switch the time frame of the candles to 10 minutes, and adjusting the time period of the moving average to a period of 4, 5 or 6. Now I would experiment with this on a demo account first before trading as well.

    Damion: As far as I know you have to buy and download the indicator if you are using MT5. That can be done by going to the following link:

    mql5.com/en/market/product/925

    Hope this helped guys!

    Tim

    Reply
  7. Damion Burke

    How can one get this VWAP indicator on the meta trader 5 platform finding it hard to find and how does one down load it?

    Reply
  8. Rene

    Hey, Tim/Mike about the 2nd answer Tim gave, we should change the time frame aswell? or stick qith the 5 min frame im also interested on testing it with a 30 min expiry time.

    Thank you very much.

    Reply
  9. Tim Lanoue

    Hey Guys,

    Sehan: Are you using the appropriate time frame with the strategy, not just a one minute time frame? I would stick with the trade as well.

    Willie: Surely, it can work, however, I would switch the moving average time period to a period 4, 5, or even 6 since you are using a longer time frame. Let me know how this works for you! 😀

    Moh: Well, this indicator comes free from freestockcharts.com… Once that charting solution has loaded, select your asset, and change the time frame to 5 minutes. Now click on indicator and scroll down until you find VWAP, click on it and then you are good to go after you add the moving average to the charting solution.

    Great questions guys!
    Thank you!

    -Tim

    Reply
  10. moh

    where do i get this indicator from please help and when i set it up will i get the arrows too which is a important factor and can you trade this strategy even when there is news release

    Reply
  11. willie

    Will this work with 30 min expiry times as my platform doesn’t support 10or even 15 min trades.Applied this to eur/jpy and it held for 30 min expiry but will it work like this long term? As long as you attack tge price at the cross??

    Reply
  12. Sehan

    What will happen 1st time it’s crossed and after few seconds it’s uncrossed? and we already entered the trade before it’s uncrossed….

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *