Stochastic oscillator is a great tool for binary options.

Stochastic Strategy For Binary Options

Winning Stochastic Strategy For Binary Options

This strategy works in multiple time frames and will lead you to numerous trades. I use this strategy in three time frames based on weekly, daily and hourly candlesticks. It can be used with other time frames, the key is to use longer time frames to signal trading direction in shorter time frames. Once a signal is taken in the longest time frame then trades can be taken in the shorter time frames. In each instance it is necessary for a signal to be present in the longer time frame in order for signals to be valid in the shorter time frames.

What Is Stochastic?

Stochastic is a technical indicator oscillator based on trend analysis of random movements. It utilizes two indicator lines based on the magnitude and direction of price movements. It assumes that over time the day to day or minute to minute movement of asset prices is random but over time that randomness will produce a pattern indicating underlying trend. What this means for binary options traders is that it weeds out a lot of the noise found in the markets and produces an indicator which reveals the underlying trend.

Stochastic oscillator is a great tool for binary options.

Stochastic oscillator is a great tool for binary options.

Stochastic is a popular indicator for forex, stocks, futures and options and is now being applied to binary options trading. It works in any time frame and can produce a number of signals including entry, support/resistance and impending market reversal. The best signals are those that occur in more than one time frame which is what I am focusing on here today.

What Time Frames To Use With Binary Options

I use three time frames for my signals. This provides me with signals for monthly, weekly and daily options. The long term time frame is charts of weekly closing prices. I use charts of 2,3, 5 and 10 years with weekly candlesticks to determine long term trends and areas of support and resistance. The short term time frame I use is daily closing prices. I daily candlesticks with 6 month, 1 and 2  year charts to determine short term trends and areas of support and resistance. As for the near term I use charts of 60 and 30 minute bars, depending on the asset. Heavily traded assets are better in 30 minute bars, less liquid assets in 60 minute bars.

How To Trade Stochastic Signals With Binary Options

Long term stochastic signals work well with weekly and monthly expiry's

Long term stochastic signals work well with weekly and monthly expiry’s

Signals are easy to see and come with a top-down organization. The first signal I take will always be on the long term charts. On this chart if the trend is up I am bullish and if it is down I am bearish. A signal occurs in a bull market when the %K line crosses the signal line from below. The reverse is true in a down trend. A signal occurs when the %K line crossed the signal line from above. The long term signal indicates a long term position such as an option with a monthly expiration. Only enter new long term positions during the week the signal forms or the week after if prices are not running wildly higher. This signal also indicates that trading short term in the direction of the trend is allowed. This secondary signal is valid so long as the %k is above the signal line and it is pointing up on the long term chart.

Weekly Stochastic Signals For Binary Options

Shorter term signals can have one week or less until expiration

Shorter term signals can have one week or less until expiration

Shorter term weekly positions can be taken with signals from the daily charts. When you have identified a bull or bear signal on the weekly charts move down to the daily. Then look for the exact same signal on the daily chart. This means that if the weekly chart signal is bearish you are looking for a bearish signal on the daily charts. Only trade in line with the long term trend in order to get best results. It is possible to trade on divergences and support/resistance bounces but those signals are not as reliable. You may be able to identify several shorter term signals on this chart, so long as the long term signal is still bullish any new bullish signal on the daily charts is tradable.

 

Short Term Binary Options Stochastic Signals

Near term signals for one day or one hour positions.

Near term signals for one day or one hour positions.

The beauty of stochastic is that it works in multiple time frames and the more time frames that converge with identical signals the stronger the signal is. Trading short term signals for hourly and daily binary positions is easy with stochastic. For these signals I use charts of hourly or 30 minute prices, it depends on the asset. The more volatile assets work well with 30 minute charts and hourly expirations, less volatile assets with hourly charts and daily expirations. The same rules apply as with the long term and short term signals. When the long term signal is bullish and the short term signal is bullish then you can trade near term signals that are bullish with a high degree of success. The exact same is true in the bearish case. When the long term signal is bearish and short term signal is bearish then you can trade near term hourly and daily puts whenever a bear signal occurs.

“The Stochastic Triple Cross” or “The Binary Super Signal”

The stochastic triple cross is when you can identify an active buy or sell signal in all three time frames simultaneously. What I mean is that the stochastic cross is happening on the current bar at the current time. This is even stronger a signal than an ordinary near term signal. A near term signal can occur at any time during the course of a long term signals life. There are many short term signals during the long term. A super signal occurs at or near the beginning of a new rally or bear market or just after a correction or relief rally. These signals have the strength of the long term trend, the short term trend and the near term trend. This signal is the only time that I would enter in all three trades at the same time …. or even consider making a larger trade than usual. One possible trade idea would be to place a 2X position on an hourly or daily position, a 1.5X position on a weekly position and then a regular size trade.

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