Invest in binary options 3 trading strategies for beginners!
The rainbow strategy for binary options combines sophisticated predictions with simple signals. It is ideal for traders who want to increase their profits by using a proven, successful strategy. A rainbow strategy is a three moving averages crossover strategy. The idea behind the rainbow strategy is simple.
Moving averages that use many periods for their calculation take longer to react to price changes than moving averages that use fewer periods. During a strong movement, multiple moving averages should, therefore, be stocked from slowest to fastest in the direction of the current market price. When you see multiple moving averages stacked in the right way you know that the market has a strong sense of direction and that now is a good time to invest.
This is the basic logic of the rainbow strategy. Theoretically, you could use as many moving averages as you like for this strategy, but the rainbow strategy use three. Three is a good sweet spot because it keeps things accurate yet simple enough to handle. Adding more indicators would create no significant increase in accuracy, but using only two moving averages would be much less accurate without simplifying things. These three moving averages determine when you invest.
You could use any number of periods for each moving average. There are two rules of thumb you should at least consider, though:.
To trade the rainbow strategy with binary options, you have to wait for your moving averages to be stacked in the right order. When that happens, you have three options for when to invest:.
An end of day strategy for binary options can find you profitable trading opportunities while only requiring a very limited time investment.
The end of day strategy is less of a strategy that tells you which signals to use and more of a strategy that tells you when to look for signals. The strategy assumes that the best time of the day to trade is at the end of the day. The end of the trading day shows some unique characteristics. This is mostly due to the fact that day traders stop their trading when a stock exchange is about to close.
Day traders are traders that never hold overnight positions. They invest for the short run and argue that a lot can happen overnight, which is why it would be unwise to hold a position during this time.
Since there are a lot of day traders out there, their absence significantly reduces the trading volume. The market is a bit slower and does things it is unlikely to do at any other time of the day. Traders with an end of day strategy wait for this environment, arguing that signals are clearer and trading opportunities better. While you can theoretically trade any trading strategy at the end of a trading day, there are a few strategies that work especially well during this time. Closing gaps are especially likely during times with low volume, which is why the end of the trading day is the best time of the day to trade them.
The accurate predictions of closing gaps make them especially attractive to traders of binary options types with a higher payout such as one touch options. A gap is a jump in price action.
Depending on how this gap was created, it can mean different things. A gap that was accompanied by a high volume likely is the result of significant news reaching the market, which probably starts a strong new movement. Near the end of the trading day, however, such gaps almost never happen.
Near the end of the trading day, there are so few traders left in the market that a few traders, possibly even a single trader, are enough to make the market jump.
Most other traders will consider the advance unjustified and invest in the opposite direction:. This knowledge allows you to trade a one touch option.
When your broker offers you a one touch option with a target price inside the reach of the gap, you know that the market will likely reach this target price. If the expiry is reasonable, too, invest. Base Line Expiry I learned a long time ago how to judge the duration of a given signal. Well before I began trading binary options.
Here I will explain how to develop an expiry strategy. The first thing to do is to identify what your signal is. Once done, you go back over your charts for a given period and identify all the signals.
Mark the strong signals and weak signals. Once that is done you can take an average of the number of bars needed. Both for the strong and for the weak signals to move into the money.
If you are using a chart of hourly prices and your signal takes an average of 3. This could be a mid day, end of day, 4 hour or other option. If the signals takes 3. If using the hourly chart, it means 3. I am going to use a basic moving average strategy to demonstrate. I will use the 30 bar exponential moving average.
It hugs prices closer than a simple moving average and will give us more signals to count. Also, in order to weed out bad signals and to improve results, I am only choosing the bullish trend following signals.
So, there are 15 total signals. On average, it takes 4. That means, since this is an hourly chart, that each signal will move into profitability and reach the peak of that movement in about 4 hours.
So for expiry I would want to choose the closest expiry to 4 hours that is available. If a good choice is not available then no trade can be comfortably made. Do not try and force trades where they do not fit.
Breaking it down a little, the weak signals peak out in about 2. Putting this knowledge in perspective, a weaker signal might be one that is close to resistance. A stronger signal might be one that is not close to resistance. Also, a stronger signal might be one where price action makes a long white candle and definitive move above or from the moving average whereas a weaker one might only create small candles and spinning tops.
Choosing an expiry is one of the most important factors in making a trade. All too often I get asked questions about why a trade went bad in the final moments. One of the most common areas of error I find is in choosing expiry. Of course there can also be errors in analysis, trends or random events.
But the focus of this discussion is expiry. When trading against the trend I would suggest a shorter expiry than a longer one. Simply because there is less chance of an extended move counter to the trend. Your expiry must be more precise. When you trade with the trend your expiry can be a little farther out. Another factor that can have a big impact on which expiry is best for a given trade is support and resistance. The relative level of prices to a support or resistance line is a factor in how likely a trade is to move in a given direction.
So, how does this apply to expiry? I purposefully did not say call or put, or bullish or bearish, because this applies to both bullish and bearish trading. Binary options can make you a profit of 70 percent or more within only 1 hour. Compare that to stocks, and you understand why binary options are so successful.
To trade 1-hour strategy with binary options, there are a few things you have to know. This article explains them. In detail, you will learn the three crucial steps to trading a 1-hour strategy with binary options, which are:. With these three steps, you will immediately be able to create and trade a successful 1-hour strategy with binary options. The first step to trading a 1-hour strategy with binary options is deciding which type of indicator you want to use to create your signals.
To keep things simple, we will focus on strategies that you can trade during the entire day. We will later mention a few strategies that you can only trade during special times. Once you have found the right indicator, you have to think about which time frame to use. We are creating a strategy with an expiry of 1 hours, which gives you the first indication. Depending on which indicator you are using, however, you should trade a very different time frame.
The time frame of your chart defines the amount of time that is aggregated in one candlestick. When you are looking at a chart with a time frame of 15 minutes, for example, each candlestick in your chart represents 15 minutes of market movements.
When you are looking at a chart with a time frame of 1 hour, each candlestick represents a 1 hour of market movements. When you create your signals in a chart with a time frame of 15 minutes, you create different signals than in a chart with a time frame of 1 hour. To trade a successful 1-hour strategy, you have to find the type of signals that is perfect for your indicator. As you can see from this list, the type of indicator predetermines the time frame you have to use for a 1-hour expiry.
Some indicators predict where the next candlestick will go, in which case you need a long expiry to adjust the length of one candlestick to your expiry.
Other indicators predict long movements, in which case you have to trade a shorter time frame to give the market enough time to develop an entire movement. These recommendations are a good place to start for each strategy. Please remember, though, that they are only recommendations. Every trader is different, and if you should find that you can achieve better results with a different time frame than our recommendation, use whatever works. There is no right and wrong aside from what makes you money or loses you money.
After you have matched your indicator to a time frame, you have to match it to a binary options type. Binary options offer many different types, and each type has its unique relationship of risk and reward. You will see that it is difficult to give general recommendations, but some binary options fit some strategies better than others.
The beauty of all strategies in this post is that they work well in any market environment and at any time. Consequently, any trader can use them.
However, there are also strategies that specialize in a specific trading environment or a specific time. These strategies might be a better fit for traders who plan on trading these environments anyway. The most prominent example of this type of strategy is trading closing gaps. Gaps are jumps in market price when the market jumps from one price level to a much higher or much lower price level. The beauty of closing gaps is that they provide you with one of the most accurate predictions that you can find with binary options.
With this information, you can trade a one touch option or even a ladder option. You get a high payout and you should be able to win a high percentage of your trades, which means that you have a powerful strategy at your hands.
The downside of this strategy is that gaps that are accompanied by a low volume are difficult to find during most trading times. There are simply too many traders in the market to create a gap with a low volume. Therefore, low-volume gaps mostly occur near the end of the trading day. Many traders are day traders. They close their position at the end of the day and never hold a position overnight.
These traders will stop trading when the market is about to close because there is not enough time to make another trade. When day traders have left the market, the trading will drop off significantly. Now you can find closing gaps. Monitor all time frames from 15 minutes to 1 hour, and trade any gaps you find with a one touch option with an expiry of 1 hour that predicts a closing gap.
Traders who work during the day and can only trade after work can use this strategy to make a profit despite their work.
The important point here is that you can trade successfully, even if your time is limited. If you have to trade during your lunch break, you can find successful strategies for this limitation, too.
As with anything in life, success means making the most of your limitations. With binary options, your limitations might help you to trade more successful than if you had none. It combines an expiry that seems natural to us with a wide array of possible indicators and binary options types, which means that every trader can create a strategy that is ideal for them.
Whether you prefer a pattern matching or a numerical strategy, a high-potential or a low-risk approach, and a simple or a complex prediction, you can create a 1-hour strategy based on any combination of these attributes.
The double red strategy is a simple to execute strategy that allows binary options traders to find many trading opportunities. The double red strategy is a trading strategy that wants to identify markets that feature falling prices. The logic is simple: After it has sorted itself out, however, the falling price movement is often stronger and more linear than an upwards movement, which is why it is a great investment opportunity. For example, assume that there is a resistance.
When the market approaches this resistance, it will never turn around immediately. It will edge itself closer and closer, test the resistance a few times, and eventually turn around. While the turnaround would be a great trading opportunity, finding the right timing is difficult.
During the process of edging closer and closer to the resistance, the market will already create a few periods with falling prices that will fail to lead to a turnaround. You have to avoid investing in these periods. To find the right timing, the double red strategy waits for a second consecutive period of falling prices that confirms the turnaround.
When such a period occurs, the market has obviously stopped moving around the resistance and has started to move away from it again. Double red traders would invest now.
If you add another indicator the Average True Range, for example and like to a take a little more risk, you can also use one touch options or ladder options. Keep your expiry short. The double red strategy creates signals based on two candlesticks, which means that its predictions are only valid for very few candlesticks, too. Ideally, you would limit your expiry to one or two candlesticks.
For example, on a minute chart, you would use an expiry of 15 to 30 minutes. Binary options strategies for newcomers must fulfil some special criteria. They must be simple but effective, quick to understand but profitable. There are many complicated strategies that can make money if a trader executes them perfectly. Beginners, however, will be overwhelmed, make mistakes, and lose money. The goal of a good strategy for newcomers to create similarly positive results while simplifying the strategy.
We will present a risk-averse strategy for those traders who want to play it safe, a riskier strategy for those who want to maximise their earnings, and an intermediate version.
Following trends is a secure, simple strategy that even newcomers can execute. Trends are long lasting movements that take the markets to new highs and lows. The trick with trends is understanding that they never move in a straight line. It is simply possible for all traders to keep buying or selling continuously. There must always be brief periods during which the market gathers new momentum. These periods are called consolidations.
During a consolidation, the market turns around or moves sideways, until enough traders are willing to invest in the main trend direction. The alternation of movement and consolidation creates a zig zag line in a particular direction. This is a trend. When you look at the price charts of stocks, currencies, or commodities that have risen or fallen for long periods, you will find trends behind all of them.
Trends can last for years, but the more you zoom into a price chart, the more you will find that every movement that appeared to be a straight line when you looked at it in a daily chart becomes a trend on a 1-hour chart. What seems to be a straight movement in a 1-hour chart becomes a trend on a minute chart, and so on. There are many levels of trends. Regardless of which time frame you want to trade, there is always a trend you can find.
Since these are relatively safe strategies, you can afford to invest a little more on each trade. We recommend somewhere between 3 and 5 percent of your overall account balance. Trading swings is a variation of our first strategy, following trends. A swing is a single movement in a trend, either from high to low or vice versa.
Every cycle of a trend consists of two swings: Instead of trading a trend as a whole like trend followers , swing traders want to trade each swing in a trend individually. The advantage of this strategy is that every trend provides them with multiple trading opportunities, not just one.
More trading opportunities mean more potential winning trades, and more winning trades mean more money. The downside of this strategy is that trading a swing is riskier than trading a trend as a whole.
You are trading a higher potential for a higher risk — if that is a good idea depends on your personality. If you decide to become a swing trader, we recommend using a low to medium investment per trade, ideally between 2 and 3. Only traders who like to take risks should invest more, but never more than 5 percent of their overall account balance.
Choose your expiry according to the length of a typical swing. If you expect an upswing and a typical upswing takes about 30 minutes, use an expiry of 30 minutes. Choosing the right expiry is no exact science, and you will need a little experience to find the perfect timing. To identify ending swings, you can use technical indicators. Trading gaps combines an intermediate risk with a good chance for high profits. Gaps are price jumps in the market.
At the end of one period, something influenced the market strongly, and the price jumped to a higher or lower level with the opening price of the next period.
The most common gap is the overnight gap. When the stock market opens in the morning, all the new orders that were placed overnight flood in. If traders were optimistic or pessimistic, there is a good chance that most of these orders point in the same direction. Such a gap is a significant event because the same assets are suddenly much more expensive. The market can react shocked, some traders might take their profits; or the market can push forward, providing the sense that this is the beginning of a strong movement.
The basic principle of all four gaps is the same. Gaps are significant price jumps, which is why many traders now have an incentive to take their profits or enter the market. Both forces push in the opposite direction of the gap and are likely to close it. For a gap to remain open and create a new movement, the gap has to be accompanied by a high volume.
This high volume indicates that many traders support the gap, and that there are few people who will take their profits or invest in the opposite direction immediately after the gap. With Binary Options A zero-risk strategy is the dream of any financial investor.
While it is impossible with any investment, binary options can get you closer than anything else. When you invest, there is always some risk. Despite all efforts to predict what the market will do next, nobody has yet found a strategy that is always right.
Sometimes, the market moves in unpredictable ways and does things that seem irrational. In hindsight, we often find good explanations for these events. As a trader, you have to avoid letting this hindsight bias confuse you. When a trading day is over, it is easy to say that this event moved the market the strongest. But when a trading day begins, it is often almost impossible to predict which of the many events of the day will have the strongest impact on the market and how it will influence the market.
Even beyond the stock market, financial investments always include some risk. But binary options offer a few tools that allow you to get relatively close to zero risk. Most binary options brokers offer a great tool: Demo accounts work just like regular accounts but allow you to trade with play money instead of real money. In the risk-free environment of a demo account, you can learn how to trade.
You can try different strategies, find the one that suits you the best, and perfect it. You can wait until you switch to real-money trading until you have a solid strategy that you know will make you money by the end of the month.
While many stock brokers offer a demo account, too, binary options have one great advantage: Once you have traded a strategy with a demo account and turned a profit for a few months in a row, you know that there is a very high chance that you will make a profit when you start trading real money, too.
There will still be some risk, but binary options have helped you to eliminate as much risk as possible. For those still looking for zero risk trades, Arbitrage is another option. The breakout strategy utilizes one of the strongest and most predictable events of technical analysis: Breakouts occur whenever the market completes a chart formation. These completions indicate significant changes in the market environment. The market will pick up a strong upwards or downwards momentum, which means that many traders have to react to the change.
Since most traders anticipate the payout, they will place orders that automatically get triggered when the market reaches the price level that completes the price formation. These orders intensify the momentum even more. Digital options offer a number of strategies to trade the breakout.
Here are the three most popular strategies:. When you anticipate a breakout, wait until the market breaks out. If the breakout happens in an upwards direction, invest in a high option; if the breakout happens in a downwards direction, invest in a low option.
Use an expiry equivalent to the length of one period. Trading the breakout with one touch options. Breakouts are strong movements, which is why they are perfect for trading a one touch option.
One touch options define a target price, and you win your trade when the market touches this target price. Once you see the market break out, invest in a one touch option in the direction of the breakout. Trading the breakout with ladder options. When an asset breaks out, invest in a ladder option in the direction of the breakout. Choose a target price with which you feel comfortable but that still provides you with a high payout. All of these three strategies can work. Choose the one that best matches your personality.
There are hundreds of strategies that use Bollinger Bands. Regardless of which strategy you use, there is almost no downside to adding Bollinger Bands to your chart. Even if you do nor trade them directly, having three additional lines will not confuse you. On the contrary, it will subconsciously influence to make better decisions. Nonetheless, we will now present three strategies that not only feature Bollinger Bands but use them as their main component.
Understand these strategies, and you will also be able to use Bollinger Bands in your strategy. This is the simplest strategy, and the one with the least risk.
It can be explained in two simple steps:. There is one thing you should know, though. Since every new period moves the Bollinger Bands, what is the upper range of the current Bollinger Bands might not be the upper range of the next periods.
A quickly rising market will push the Bollinger Bands upwards, too; and a quickly falling market will take the Bollinger Bands down with it.
Because of this limitation, the strategy works best if you keep the expiry of your binary option shorter than the time until your chart creates a new period. If there are 30 minutes left in your current period and the market approaches the upper end of the Bollinger Bands, it makes sense to invest in a low option with an expiry of 30 minutes or less. If you want, you can also double-check your prediction on a shorter period. Switch to a chart with a period of 15 minutes, and if the market is near the upper range of the Bollinger Bands, too, you know that there is a good chance that it will fall soon.
If it is in the middle of this trading range, however, you might consider passing on this trade. You might also consider upgrading this strategy to trade binary options types with a higher payout. By adding a momentum indicator, you can invest in option types that require a strong movement.
To understand how to add this indicator, consider the example of our next strategy. The middle Bollinger Band has special characteristics. While it offers a resistance or support level, the market can break through it. When it does, the Band changes its meaning. Both events change the entire market environment.
When the market breaks through the middle band, it suddenly receives enough room to move to the outer band. This means you know the direction in which the market is likely to move and the distance, which is a great basis for trading a high-payout binary option. For this strategy to make sense, you have to use a one touch option with a target price that is within the Bollinger Bands. On the other hand, the expiry has to be long enough to give the market enough time to reach the expiry.
Finding the right mix of closeness and enough time can take some experience. You can also use momentum indicators such as the Average True Range ATR to provide a mathematical basis for your estimate. The market is highly likely to move beyond the outer Bollinger Bands. This knowledge is a great basis for trading low-risk ladder options. Ladder options define a number of different target prices, usually five or six.
Some of these prices are above the current market price; some are below it; some are close, some are far away. Ladder options allow you to make this prediction and win a simple trade. To execute this strategy well, make sure that the period of your chart matches your expiry. Bollinger Bands change with every new period, and a target price that is outside the reach of the Bollinger Bands during the current period might be well within their reach during the next period.
When you trade a ladder option with an expiry of one hour based on a price chart with a period of 5 minutes, so many things can change before your option expires that the Bollinger Bands become almost meaningless. By matching the period of your chart to your expiry, you guarantee that the Bollinger Bands stay the same until your option expires. The volume is one of the most under-appreciated indicators. Combined with binary options, a volume strategy can create great results.
The trading volume is a simple yet important indicator. The volume indicates how many assets very traded during a period. The direction of these trades is unimportant to the volume. As you can see from these examples, the volume only makes sense in relation to preceding periods. A volume of says nothing until you know whether the preceding periods featured a higher, lower, or similar volume.
A volume strategy uses the volume of each period to create predictions about future price movements:. Binary options are primarily short-term investments. But if you want to invest for the long term, binary options have a lot to offer for you, too. Now, the below strategy is a very aggressive one that defines the means of sane trading.
This strategy represents the use of price cycles and Fibonacci sequence in fast trading. Trades are not only taken at levels and And Fibonacci levels are drawn for every cycle. This strategy also exploit the full potential of value charts. Above you learnt what you are hunting, where to find your prey, and how to bag some prey steady and safe.
Now, we will go after the BIG 5. Now, change your zigzag indicator parameters to 2,1,1. How many short-term price cycles do you see now? Each of these cycles is a Fibonacci sequence with a high-low-retracement-projection-reverse.
Look at the chart below:. Within each price cycle between 3 points there are on average 3 ITM trade setups during normal volatility trading conditions. This strategy will produce around setups per currency pair per day, so use it wisely, and be very sure to learn it by heart before you jump in full steam.
The 3 strategies explained here work for all currency pairs, commodities, stocks and indices. However, even with the conservative strategy, a trader can produce excellent results if they trade assets, and take 2 high probability trades per asset per day.
Click here to read my next and last post in this mini series. Conservative Long-term Strategy This strategy is for those who are new to this game and want to build up their capital slow and steady. They key here is to be patient until all 3 factors line up. The entry rule is: And your target is trades per day. If you lose, start with the last set of bids: The rules for entry are the same as with the conservative strategy: And remember, You have to stick with the entry rules. Aggressive Strategy Look at the chart below, how many price cycles do you see?
Look at the chart below: Now it gets complicated and wonderful: The Fibonacci is drawn between points 1 and 2 in light blue and marked on value charts the last high and low, 1 and 2 respectively.