Binary Options Strategies
Binary option (also called a digital contract) is a bet on whether the price of a certain asset will fall or rise in a certain period. If the trend (price direction) at the strike level (at the time of opening the option, contract) is determined correctly, then the bet is returned with a profit. If wrong, the bet either stays the same or "burns out" and brings losses. If we consider binary options (Fig. 1) as an investment, it is a fixed-value financial instrument with a predetermined amount of profit.
Trading Binary Options involves two operations - Call (Up) and Put (Down). If the trader assumes that the price of the currency will rise, he buys the Call option. If the forecast is downward - he buys Put.
- 1. Popular Options
- 2. Indicators
- 3. Binary Options Strategies
- 4. Trading signals
- 5. Binary Options Brokers
- 6. reviews
Brokers provide the opportunity to earn through different types of options. The top binary options include:
- One Touch.
- Boundary/Range (Range).
The most popular type, which absolutely all brokers have and with which binary options trading starts - is the option "Up/Down" (Up/Down). Once on the market was presented only this type of options, all others appeared later. Most of the strategies are based on these options. Term expirations Up/Down from 30 seconds to several months. Conventionally, turbo options include contracts for a timeframe of 1-5 minutes, to the standard Up/Down contracts for a period of 15 minutes to several hours. Long-term options are offered for a period of 1 day and longer. The return on a successful transaction of Up/Down options is approximately 70-90%.
Top 5 best binary options brokers: test their terminals
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A more complex, but quite popular, although not offered by all brokers, type of option "One Touch" (One Touch). The trader predicts price levels, placing them above and below the strike price and expects the price to touch the level at the time of expiration. If the trader's forecast is correct, he will make a profit as soon as the price touches the required level, i.e. the contract can close before the expiry date. The profitability of this option type ranges from 100%, sometimes up to 500%. Boundary/Range option type (Range: the broker places price levels below and above the strike price and the trader predicts where the price will be at the expiration time - inside or outside the provided price range. Yields can be as high as 300% (Binary options trading training).
Stairs are the most complex of the top options: the broker sets several levels above and below the strike price. The trader predicts where the price will be, and the farther the price reaches, the higher the profit. That is, for example, the first level touching the price brings profit 70%, the second one 90% and so on. If the price doesn't reach a certain level, there will be no profit. To profit from any type of options, you need to find or develop a good, profitable binary options strategy yourself.
The main task of a trader when trading binary options is to give a correct price forecast for a certain period of time. To make a forecast as accurate as possible, the following techniques are used Indicators for Binary Options. Trading binary options is quite a dynamic type of trading, so the ability to use indicators and understand their signals is very important. The following groups of indicators are distinguished:
- Trend indicators - they determine the price direction of the asset, the trend; most often they are based on the behavior of different moving averages (Fig. 2); in profitable binary options trading strategies, trend indicators are often used as an additional tool;
- oscillators - determine the levels, reaching which the trend can turn in the opposite direction;
- volume indicators - allow you to determine the activity of traders, it is important in determining the price fluctuations.
- Arrow indicators are often used in binary options, they are based on normal, basic options and focus the trader's attention on the right signals, they can be especially useful for beginner traders.
There are a huge number of indicators, but there are a few classic indicators, the knowledge of which is necessary for any trader: Bollinger Bands, RSI, MACD, Parabolic SAR, Stochastic.
Bollinger Bands (Bollinger Bands), (Fig. 3): represents three moving averages, one of which is central, one moving average is directed upwards from the central one (support levels), the second moving average is directed downwards at the same distance. Thus a "channel" is formed, the wider it is, the higher is the volatility (fluctuation) of price. Trading signals are generated when the price curve touches the Bollinger Bands.
RSI - oscillator, which shows the moments of trend reversal and determines the strength of the trend. On the chart looks like a curve, moving mainly in the range of 30% and 70%. One or two additional indicators are used to confirm RSI signals.
MACD indicator allows predicting the probability of trend reversal and its strength. It is displayed on the trading chart either in the form of two lines (fast and signal), or as a histogram. It is considered that the MACD is the most effective at the markets with high volatility and it can (and should) be used with additional indicators.
Parabolic SAR serves to determine the moment of closing the current position in order to open a deal in the opposite direction. The indicator is displayed on the price chart as points forming a parabola. In good binary options trading strategies, Parabolic SAR is usually used as a complementary tool.
Stochastic Oscillator (Fig. 4) allows you to determine the direction of the trend and predict its reversal. On the chart looks like two lines (K and D), which are mainly placed between the levels 20% and 80%. Stochastic signals should be very clear, if the oscillator indicators look doubtful, it is better not to regard them as signals. Therefore, as a rule, the Stochastic is used as an additional tool when implementing binary options trading strategies.
It is on the basis of indicator information that traders implement the majority of profitable binary options trading strategies. Evaluating the information from indicators and oscillators, it is possible to make decisions about buying options, but in most cases not the most accurate binary options strategies are formed on the basis of one indicator. But already on the basis of two indicators for binary options strategies, a huge number of trading methods and entire trading systems have been developed. Before implementing complex indicator strategies, you should be trained, either on your own or in a broker's service. Having mastered binary options indicators well, it is quite realistic to build your own strategy.
Binary Options Strategies
There are several basic types of strategies.
Price Action Strategy
Proponents of the strategy Price Action argue that strategies do not have to be complicated in order to profit from binary options. You don't need anything but a price chart for successful binary options trading - price includes everything, so by tracking past and present price behavior, you can predict its behavior in the future. This binary options strategy is implemented on a candlestick chart, then the signals are combinations of candlesticks. Also signals are generated by the placement and behavior of prices near price levels (CC, price level). The main signals in this case will be combinations of candlesticks, as well as the location and behavior of prices near so-called price levels (CG). The ability to conduct a candlestick analysis is a separate science of trading, which requires the understanding and use of candlestick patterns, of which there are a lot. But the most popular and easy to understand when trading binary options are pin bars and takeovers.
A pin bar is a candle with a short body and a long shadow, pointing in the direction of an ending price momentum. A pin bar indicates that a trend reversal is about to begin. Accordingly, if the pin bar is formed at the top of the trend, you should expect a signal to buy Put, and if the pattern is formed "at the bottom", you should prepare to buy Call. An absorption is a pattern of 2 candles, the second of which "consumes" the first candle in order and signals a market reversal. The absorption may be bullish or bearish. In the first case it looks like the appearance of a candlestick, which means a growing trend (bullish), next to the candlestick, which showed a downtrend. The occurrence of such a pair traders regard as a signal to buy a Call option. If a pair occurs, in which a bearish candle absorbs a bullish candle, it is a signal to buy a Put option.
But not all candlestick patterns are as reliable as Pin Bar and Takeover, and not all traders can confidently identify even such notable and reliable patterns. In this case, in the Price Action strategy, the signals are checked against the price behavior. The price either bounces off the price level, its promising a trend reversal, or breaks through it and thus confirms the continuation of the trend. For this binary options strategy, it is important to apply the price level correctly and choose the exact interval. It is considered optimal to practice Price Action on timeframes no younger than M15. The signal to buy a Call option can be:
- The breakout of the price level from bottom to top in an uptrend, with the "breakout" being made by the body of the candle, and the next candle opens and closes higher;
- a price reversal close to the price level on a downtrend - this is indicated by at least three candles that are placed close to the price level, but do not break through it.
The signal to buy a Put option can be:
- breaking the price level from the top down on a downtrend - the body of the candle, and the next candle should open and close lower;
- a price reversal close to the UC on an uptrend.
The strategy of binary options Price Action implies a good knowledge of the market and requires a certain real trading experience. You can try it first in the demo mode in the trading terminal of the broker.
Martingale Strategy or simply Martingale - a strategy on binary options, quite a popular strategy for binary options in Russia (and around the world), but highly risky. The idea is to double your bet after a losing trade. If successfully executed, this binary options strategy allows you to cover the loss and make a profit. In mathematical terms, the size of the win is 80% of the value of the option and the loss is 100%. From a practical point of view, the trader needs to have an impressive deposit, as it is unknown how long he will have to wait for a profitable trade.
Traders who practice Martingale, as a rule, do not double the bet, but increase it by a coefficient higher than 2, for example, 2.4. But at a higher coefficient and the deposit will be exhausted faster. Trading binary options according to the Martingale method is, nevertheless, possible, but you need to understand the market very well and strictly observe the requirements of money management. It is possible to earn with Martingale, but such a binary options strategy as Martingale is not recommended for novice traders.
Three Candles Strategy
Trading strategy for binary options "Three candles" or "Third candle" (Fig. 5), involves entering into a transaction after closing two reversal candles. In this case, the reversal must be after the market impulse - that is, after a sharp jump in price in one direction (up or down) for at least three candles. Accordingly, the price impulse must be monitored on the candlestick chart - sharp price movements can not last long, you must be prepared for it to end and the trend reverses in the other direction. For example, if the trend is sharply upward, the trader keeps track of when it will reverse downward. And as soon as the reversed trend is confirmed by two candles in the right direction, the trader can buy a Put option.
The strategy is suitable for different timeframes, including the minute. In this case, the duration of the option should be equal to the duration of the candle. But more often "Three candles" is included in the strategy for binary options for 5 minutes. If it is implemented as a 5-minute strategy, then purchase a binary option with an execution time of 5 minutes.
Three RSI Strategy
"Three RSI" or Triple RSI (Fig. 6) is considered one of the best strategies for binary options. It involves the use of three identical but differently tuned indicators. The strategy can be used as 1-minute and 5-minute, and on other timeframes. The three RSIs allow you to filter out more false signals and more accurately determine the direction of the trend.
When implementing the strategy, the RSI is set, for example, at 5, at 14 and at 21 and the levels are set, respectively, at 20, 80 and 50. The trade is made, as one can guess, when all three indicators, with different parameters, are placed in the overbought or oversold zone. The signal for buying a Call option is the placement of RSI in an oversold zone, while the signal for buying a Put option is the placement of RSI in an overbought zone. An additional confirmation may be the formation of a candle in the direction of a new trend. The triple RSI binary options trading strategy is considered to be one of the easiest strategies to learn and the least risky in binary options trading, provided that the money management is strictly adhered to.
Parabolic MACD Strategy
Binary options strategy that uses indicators Parabolic SAR and MACD (Fig. 7) works optimally on a pronounced, steady trend on popular currency pairs and is not recommended for low-liquid currencies. It is considered one of the really good binary options strategies. Under these conditions, the strategy is basically suitable for any timeframe. If there are 2 points of Parabolic SAR indicator under the price chart and the MACD indicator histogram is above the 0 mark, i.e. in the positive zone, this can be a signal to buy a Call option.
If two points of a parabola arise from above the price chart and the MACD histogram is placed below the zero line, in the negative zone, this can be a signal to buy a Put option.
One-minute strategy by levels
The most popular for binary options are 1 minute strategies. For example, binary options trading on the support/resistance line is considered one of the effective strategies on this timeframe. In this strategy, the signal to open a position is a touch of the support/resistance level and its breakdown. A transaction can be profitable even at very small fluctuations. A Call option is purchased if the price touches a support level and rushes upwards.
If the price pushes back from the resistance line and begins to move downward, a Put option is purchased. If a breakout is observed and the price continues to move in the original direction, the option is opened in accordance with the developing trend. However, working on lines only is for experienced traders, it is not recommended to start with it. In addition, the effectiveness of the binary options strategy is higher if it is still combined with indicators, such as Stochasticwhich confirms or refutes the signals of the levels.
Head and Shoulders Strategy for 60 Seconds
Head and Shoulders Strategy quite workable on any timeframe, but because of the accuracy of the signals is considered very effective for the minute timeframe. "Head and shoulders" is a graphical figure on a trend chart, for example, the top of the left "shoulder" is the price maximum, the "neck" represents the support level, the head is the higher maximum (extreme), the right "shoulder" maximum is approximately at the same level with the left "shoulder". On a downtrend the figure looks mirror like head down.
In general, a break of a support level after a pattern is formed can signal the purchase of a Put option, while a break of a resistance level can signal the purchase of a Call option. Although chart pattern strategies are considered to be reliable strategies for binary options, it takes time to learn how to identify patterns on a chart without errors. Therefore, it is best not to start your career as a binary options trader with them.
Strategy with the exact term of the option
The "Bollinger Bands" and "Commodity Channel Index" (CCI) indicators are used in the binary options trading strategy with a precisely defined option term (Fig. 8). "Commodity Channel Index" (Commodity Channel indexThe CCI is an indicator that shows overbought and oversold levels and is one of the most popular in all financial markets.
The strategy is implemented on 5-minute timeframe, the CCI is set with levels of +300/-300 and the period of 40, and the "Bollinger Bands" with the standard settings of the trading terminal. On the 5-minute chart, the transaction is carried out when the trend is confirmed by 3 candles, that is, the period - 15 minutes, no deviations are allowed. When the commodity channel indicator is below -300 and the price has crossed the lower Bollinger band, this can be a signal to buy a Call option. If the CCI crosses +300 and the price line breaks the upper Bollinger band, this may well be a good signal to buy Put.
Beginner traders spend a lot of time searching for strategies for binary options - the best and profitable ones, trying new options strategies, but as practice shows, a really profitable strategy for binary options is the one that the trader has thoroughly learned, adapted to his goals and learned to apply in practice.
Trading strategy by news
Trading options based on economic news can be a good strategy, albeit a risky one. The bottom line is that macroeconomic factors change the market value of a currency, sometimes almost instantaneously, and the fluctuations of currency pairs can be very large. As part of the strategy, traders evaluate:
- macroeconomic news;
- serious geopolitical events (climate change is now also one of them);
- big company events;
- statements by major figures in politics and business.
It is advisable to seek information from public sources - there is no shortage of them. Insider information, firstly, is illegal, and secondly, it is highly unlikely that someone actually wants to share the insider information with clients, and if that happens, it is most likely a fraudster. By the way, some brokers prohibit trading on open news as well - this point should be clarified in advance. To trade binary options on the news, it is necessary to use the economic calendar, which is regularly published by brokers.
Those who want to engage in a reliable strategy for binary options, but do not have the opportunity or desire to dive into the study of the intricacies of the market, to comprehend technical analysis and track signals on the indicators themselves. In this case, there are many resources on the Internet - signal providers, including those providing trading signals online for binary options for free.
Trading advice can be given by binary robots - programs that make predictions according to a certain algorithm. There are a huge number of bots on the Internet, to which you can subscribe and use the signals in option trading. In theory, the robot can give objective signals, devoid of errors due to human factor. But in practice, programs that provide useful signals are not just available on the Internet, they are developed on a case-by-case basis. Such trading robots can not only provide signals, but also perform trader's actions, relieving the human trader of unnecessary work. But it is very, very difficult to find such a robot.
Manual trading signals are generated by people, ideally advanced experts in financial markets, who are willing to share their knowledge with anyone who is interested, not only with signals, but also with descriptions of binary options strategies. Signals can be delivered via sms, email, apps in your smartphone, in your personal account of a financial platform and so on. The easiest way to get signals is to get them from a bank that publishes their analytics and reviews on their websites, and on specialized financial platforms and, if they provide trading support, they provide them in apps and personal accounts.
Third-party resources that send signals include Investing.com, the world's leading global financial portal with comprehensive information about finance. Tradingview - the most famous analytical aggregator of financial information, which will be useful to all traders, even if they do not need signals - live charts of this company are placed by many brokers. Trade Signals is another financial forecasting service with different subscription options.
Signals - their own or those of the most successful clients - are published by some brokers of binary options, among them Pocket Option (go online), Binarium (go online). The main difficulty in trading on the signals is not only and not so much in the huge number of fraudsters - providers of signals, but the fact that to trade only on the basis of signals, even if the signals are bona fide - not a good idea. Signals alone - without an understanding of the market, trader's skills, the ability to not only accept but also interpret signals correctly - will not lead to success, even if they are very expensive, exclusive signals from outstanding professionals. Having mastered the binary options market, having mastered the work with indicators, having gained practical experience in option trading you can start looking for a signal source. When choosing a source, there are four main factors to consider:
- Price: you can start with free services, carefully trying to apply them in real trading; move to paid sources with great caution.
- Type of notification: it can be sms, voice signals, posts, letters - any way most convenient for the trader.
- Informative and timely: signals must be expressed clearly and unambiguously, applicable in practice, and delivered when needed.
- Usefulness: the most important thing is that the signals really help in trading, this will be found out quite quickly, so it is better to study the source of the signals as thoroughly as possible before receiving them.
Even the best signals should not be used without verification, not critical. This is in any case not a guide to action, but a recommendation. Often financial platforms or banks with online trading terminals publish signals in one word: "sell" or "hold" or "buy" - and this too is not a guide to action, but a recommendation, which should be evaluated based on your own understanding of the situation and goals. Binary options are a good way to make money only if the trader is aware of the responsibility for his actions.
Binary Options Brokers
There are unlimited opportunities online to trade binary options. And where exactly to trade can be found in the top ratings Binary options brokersSo choosing the right binary options trading platform will be easy. Many of the brokers also work on the market forex. Among the best brokers recently indicated:
Intrade Bar (go online) - broker with a minimum deposit of 500 rubles, provides trading 24/7, but on weekends trading takes place at the same for all quotations. There is no welcome bonus.
Binarium (online) - when making a deposit of 3 thousand rubles, a new client receives a welcome bonus of 100 %, there is a demo account of 60 000 rubles; the minimum deposit amount is 600 rubles, the minimum transaction amount is microscopic - 60 rubles.
OlympTrade (go online) - one of the most popular platforms, for the registration of citizens of the Russian Federation is still closed. Very powerful, multifunctional platform, is constantly present not only in ratings of brokers of binary options, but also in ratings of forex brokers.
Pocket Option (go online) is a large binary options broker with its own trading platform. Offers quality analytics and training for beginners. There is social trading and affordable minimum deposit to enter.
Quotex (online)- binary options broker, works mainly in the direction of digital options, with a low entry threshold and no commissions. Betting on an increase or decrease in prices, rather than specific values. However, it is difficult to know about the trading conditions before registering.
Of course, these brokers of binary options market is not exhausted, the trader can platform with more suitable parameters for the implementation of his strategies. The rating of binary options brokers is a good guide, but not enough. When choosing a broker, you need to pay attention to the working conditions, what deposit is required to start working, whether there is a welcome bonus, what trading terminal (own, MetaTrader or other), whether the broker provides binary options training opportunities. It is very desirable to check whether the broker has a good reputation among professionals, specialized forums offer reviews of brokers from real traders. Also, do not forget that there are blacklists of brokers, and you should periodically visit them.