We continue telling traders of strategies that can be used during the binary options’ trading. We have already considered a generous amount of the trading systems that can provide profitable work if you use them appropriately.
In this article we will consider the authorial strategy which is called the trend following oscillator strategy and is based on a reverse of the current trend. This method is based on the understanding that any movement occurring in the market is not endless. It inevitably leads to the event when a price undergoes a retracement. Its volumes can be different, including those that provide a formation of the new trend. And it sets a task before a trader which consists in the precise determination of the point, in which the current movement has sputtered out. It is important to understand that this event can occur both at the beginning of the movement and at its later stages. This strategy allows determining the time when the market had conducted the strong momentum movement which sputtered it. In order to do this, two types of indicators can be used: trend oscillators. This combination aims to determine the time of the trend’s end, and it is fairly effective.
We can apply these trading tools:
- Indicator Relative Strength Index.
- Indicator Commodity Channel Index.
These indicators complement each other perfectly. For our work we will use their basic settings. We will change only the CCI by extending its control levels to +200 and -200. Main parameters of setting this strategy are represented below.
The distinctive feature of working with this binary options’ method consists in the fact that its application is acceptable even for the fairly small timeframes. Of course, we do not consider the noise time of one minute, but the 5-minute chart can be applied in a work with this strategy.
Trading principles of trend following oscillators strategy
Given the fact that we are working with the determination of the trend’s exhaustion, we have to mark the overbought and the oversold market’s zones that will be the strong bounds of the price’s movement. Below you will find the table which determines these levels expressly:
|Overbought zone||70-100||higher +200|
|Oversold zone||0-30||lower -200|
In fact, it allows creating rules for the trading. For example, if both tools are located in the oversold zone, we can buy a binary option for the raise. We’d like to note that we have to buy the lot for 5 predicted levels, which, in our case, amount to 25 minutes. This parameter is estimated in the following way. If the analyzed timeframe equals to 5 minutes, then the expiration time would be 5 * 5 = 25 minutes. Correspondingly, it the timeframe is 30 minutes, the expiration time would be 30 * 5 = 150 minutes.
Pay special attention to the second trading signal on the left. We can see two strong declining candles that preceded the appearance of the entry point to the deal. The widespread mistake made by many beginners, who use this strategy, is starting the trade during the so-called bordering time. And the appropriate trading is based on the obvious determination of both indicators in the marked critical ranges. If the crossing is not obvious, it is better to refrain from the purchase of a binary option.
Buying the binary option for reduction is necessary at the time when the strategies’ tools are located in the oversold range. Again, you have to wait until both indicators decline and only then buy a lot. Screenshot of such signal is given below.
The main rules of trading are not changed. Expiration time of a lot is 25 minutes.
In a conclusion, we can consider the trend following oscillator strategy as a system which can provide the profitable binary options’ trade in the mid-term run. It can be effectively applied in the long-term trade too, but this is not its main destination. When you conduct a trade, you have to remember about a need of the clear determination of the expiration time, as well as to be able to wait until the obvious decline of indicators to the required ranges.