We continue to consider the authorial strategies developed by the professional investors, but currently available for everyone. In the previous publications we have repeatedly considered the model’s simplicity in work as one of the most important factors of the work’s profitability. And today it is the time to discuss a very simple tool that is based on the basic models of the market’s development.
Different strategies are represented on our website, and they approach the market’s trading in different ways using different elements of the technical analysis. Each of such elements is useful for traders and can bring profit if it is used correctly.
In order to conduct the market’s analysis, we will use the live chart which provides a trader the possibility to receive the trustworthy quotes of the change of the underlying asset’s rate in the real time. In order to use this tool, no additional software installation is needed because it is available online and for free.
Indicators’ setting for work
The medium term trading strategy is very simple in its essence and is based on the application of two indicators, which complement each other:
- Bollinger bands
As for the first tool, its application consists in the work with the basic settings. But we don’t need to change or adjust anything. In this case, Bollinger bands will be the some sort of the veracity’s criterion for those signals that are obtained as the result of the second strategy’s element.
We will adjust the CCI indicator by changing the basic settings. In order to do this, we will use 40 as the period for analysis, and the tool’s level will be located on the +300 and -300 values. It is done with a very simple aim to reduce a number of the false signals which will be inevitably received on the small intervals of analysis.
The described tools allow getting the fairly productive model which determines points of the sideways price’s movement when the market has exhausted its resources and there is no perspective for a continuation of the trend. In fact, we are considering the situation when the market players who were having the opened positions in the certain direction are ready to start new work for the retracement because the previous trend has no potential left. In this regard, it is necessary to remember that the currency markets have its development stages, which will be used by us. Nothing is eternal. Any trend that has begun will end sooner or later. This can be applied to the retracements and to other movements that may appear. This is the exact base of this strategy.
We have come to the most important part of our article, to the application of the medium trend trading strategy. Here we will consider all cases that provide a trader with the signals for the binary options’ trading. So, we can consider only two directions of trade and only two types of signals:
- Work for the raise. This entry point is formed on the market’s bottom when the indicator of strength falls to the zone lower than the -300 spot. If at that time the underlying asset’s price has crossed the BB bands, then we can say that the raise signal is received.
- Work for the reduction. Here we can see the opposite situation, and the purchase of the binary option for reduction is conducted when the CC is higher than +300, and the asset’s price has crossed the top line of bands.
And the reasonable question appears: what expiration time for an option to choose? The answer is simple: this tool allows making the forecast for the three following candles. In other words, if we analyze the chart for 5 minutes, as in the example, we have to buy the lot for 15 minutes. And if we work with the 1-hour timeframe, the option has to be bought for three hours.
Perhaps, we have come to the most important part of our article. It is especially important to note that the medium term trading strategy is not perfect and not fully adapted towards all stages of the market’s development. For this reason, it is important to remember that the flat is a killer of this strategy. As soon as the strongly marked flat has formed in the market or the underlying asset’s price has started to get out of the sideways movement, forgetting about a trade and giving time for a market to recover will be the best decision.
In general, these are the versatile recommendations that are necessary to be applied because any flat shows the approximate equality between sellers and buyers. But a market can’t stay equal for eternity, and it means that someone is preparing the new attack. And if you open the position in the opposite direction at the time of the beginning of such attack, the result will be different from what you expect. It is also necessary to remember about candle combinations that can prevent the reckless actions.