A Binary Options Strategy That Works
“With no knowledge of trading I spent months studying, I read everything that I could find and tested various indicators and strategies. Finally I’ve put together everything that I’ve learned into a strategy that if followed correctly should keep you profitable. It’s important to see the whole picture and remind
yourself of what you are trying to achieve with the strategy you are currently using.
As a newbie this is difficult, suddenly you no longer know what you are looking for and you are simply lost! That’s when you start losing. So keep in mind what you are looking for when you are analyzing your charts. Hopefully with my strategy getting confirmations and spotting a possible trade is simplified. And that is the whole point!”
≈ Okane ≈
Mr. Okane is one my fellow traders over at Communitraders. He first described this strategy for trading 15-30 minute binary options in a forum post that has become on of my favorite on the site. The strategy is based on the RSI indicator, uses two time frames and is trend following. Originally intended for taking signals on charts of 5 minute candle sticks I think it can also be used with success in longer time frames as well. Okane is trading CySEC style digital options but this strategy will also work well with Nadex and 0-100 options. This is how it works.
The Trading Tools
- Chart Time Frames – This strategy uses two different chart time frames; 15 minute and 5 minute. The longer term is for determining trends and setting trade direction, the shorter term is for pin pointing entry.
- Moving averages – This strategy uses three moving averages to help determine the trend. The moving averages are used on the longer term 15 minute chart and are the 50 bar, 21 bar and 5 bar Exponential Moving Averages.
- Support and Resistance – This strategy uses support and resistance lines. Lines should be drawn any where and in any time frame that they appear to be important. This tool is not restricted to the 15 and 5 minute charts. Okane uses a support and resistance tool that automatically seeks out potential areas. You could also use Fibonacci Retracements.
- RSI(4) – This strategy uses RSI (Relative Strenght Index) to pin point entry. It is a fast RSI, set to 4 bars, and is only used to produce signals that follow the underlying trend as set on the 15 minute chart. Signals are only taken on the 5 minute charts.
- Candlesticks – This strategy uses candle stick charts in both time frame. The candlesticks are used to help identify trends and entry points.
- Stochastic – This strategy uses stochastic as a coincident indicator. Okane uses it to help determine underlying trend and to confirm his entries and exits.
For this strategy you will start with charts of 15 minute candlesticks. Of course, I recommend using a chart of daily or at least hourly candlesticks first to draw some support and resistance lines first. Once that is done begin with the 15 minute charts, if the current price is near one of the support/resistance lines it could be a negating factor for any signals you get in that direction. Use the moving averages to determine the trend in this time frame. If the shorter term averages are above the longer term 50 bar moving average then the trend is up, if they are below it then the trend is down. Also look for higher highs/higher lows in the case of an up trend and lower highs/lower lows in the case of a down trend. It is best if both conditions are met as Okane does not recommend using this strategy in a sideways trending market.
Once you have identified a clear trend it is time to wait for the signal set up. The set up begins when the RSI reaches over bought or over sold levels. In the original posting a bearish example is given but this strategy works equally well in both directions. So, assuming a down trend, wait for the RSI to reach over bought. This will happen when the asset price bounces higher before resuming the current trend. Once RSI reaches over bought levels it is time to move down to the 5 minute charts to pin point an entry.
On the 5 minute chart you will need to wait for a confirming signal. This can be a variety of things but will be a signal continuing the underlying trend on the longer term 15 minute chart. Let’s look at the buy signal in the example below. Just prior to the signal the chart is bullish but prices are extended, waiting for a pull back is recommended. Once prices pull back to the moving averages a series of candlesticks confirms support and signals an entry. Once an entry is confirmed binary options with 15 to 30 minutes of expiry are used.
Before entering a trade you need to take support/resistance into consideration. If the asset’s price is close to S/R and your signal is in the same direction you may need to await a break through before opening a position. If the asset prices have already broken through S/R or are in between two S/R levels then trend following signals have a high rate of success. Stochastic is also used at this point. A trade may be indicated by RSI
Some Words Of Caution
This strategy is based on very short term charts. Even though currency pairs are very active in these time frames it is still harder to predict than longer time frames like hourly or daily movements. You have to be really quick to catch some of the trades. News events can also have a big impact on this strategy and should be avoided until you get a handle on using it. In addition, Bogdan (one of the other Pros at BOTS.com) advises using a longer RSI than the (4) suggested in order to smooth out the line and help reduce false signals. Okane himself will caution you to use stochastic as a coincident indicator when timing entries. RSI may be signalling you to open a position but if stochastic says the move is already played out then you should stay away. An example would be is RSI indicated buying a call position but stochastic was already overbought.
Bonuses To Using Okane’s Strategy
- Currency pairs with like denominations can also produce similar trades. For example, if a trade on the USD/JPY is working then a trade on the EUR/JPY may work as well. Likewise, if a trade on the USD/JPY is working then the opposite trade may also work on the EUR/USD. In order to take advantage of this you will need to be extra quick.
- This strategy relies on two time frames to confirm signal. This helps to weed out false signals and even more importantly, pin point the right entry. It really sucks to take a good signal only to get in at the wrong time and have a potentially great trade lose.
- This strategy has the approval and support of the trading community at BOTS.com and Communitraders.com.
Click here for the full story at CommuniTraders!
Binary Option Updates!
I apologize for the delay in adding this to the page. Okane has been updating his progress and trading account regularly on Communitraders forums but also has been keeping an update on his Google+ page. To check in for the latest results click here.