You need a solid binary options strategy if you want to make an income by trading BOs. As we said in the last post, the thing that we like about binary options is that you can win 80% return in just 1 minute. Did you read the last post on a 1 minute binary options strategy?
Now for most traders trading 1 minute binary options can be too fast. Don’t worry you can use the same strategy on 5 minute, 15 minute or even 30 minute. What works on 1 minute also works on 5 minutes, 15 minutes and 30 minutes. We can use the very same price action patterns on 1 minute, 5 minute, 15 minute and 30 minutes and even H4, Daily and Weekly. Long time back we stopped scalping and instead started trading binary options. We now only swing trade.
3 Exponential Moving Average Rainbow Strategy Infographic
Below you can see the infographic of this 3 EMA Rainbow Binary Options Strategy.
Choose 6EMA, 14 EMA and 26 EMA and save the template as BinaryOptionsStrategy. Now we will only trade when there is a strong trend. How do we know there is a strong trend? We wait for 6EMA to go above 14 EMA and 14 EMA to go above 26 EMA. This is a strong uptrend. We wait for price to retrace and close between 6 EMA and 14 EMA. Now wait for a bullish candlestick signal. When you get one, buy a call option with expiry 30 minutes if you are trading on 5 minute chart and if you are trading on 1 minute chart, buy a 5 minute call option.
In the same manner, wait for 6 EMA to go below 14 EMA and 14 EMA to go below 26 EMA. Now just as above wait for price to go between 6 EMA and 14 EMA. Wait for a bearish candlestick pattern like a pinbar, bearish engulfing or a harami pattern to form. When it does buy a put option with expiry 30 minutes if trading on 5 minute chart and a 5 minute put option with trading on 1 minute chart. You can also watch the video below that explains this binary options strategy in detail.
https://www.youtube.com/watch?v=zkVrsKQtRFw
Combine Candlestick Reversal Patterns With This Strategy
Now you must be amazed at the simplicity of this binary options strategy. Simple systems are the best trading systems. As said above first we let the trend develop. We are not catching the tops or the bottoms. We just wait for the trend to develop. Then we wait for price to make a retracement. When price makes a retracement we enter in the direction of the trend. We use candlestick trend reversal pattern as our entry signal. This is something very important for you to understand. Candlestick reversal patterns ensure that you don’t get stuck up with a whipsaw. Candlestick reversal patterns that you can use are the engulfing pattern, haramic, dojis, shooting stars, hammers, inverted hammers etc.
Risk Management Is Very Important In Binary Options Trading
When you are trading binary options you must know that you are always winning less than what you are risking. The return is 70-80% and is not 100%. If the return is 100% you are making as much as you are risking. What this means? This means that if you lose you will have to win 2 trades in a row to recover the loss. This is unlike forex where you are choose high reward/risk trades something like 5:1 and 10:1 which ensure that you always win more than you lose. So in binary options trading you need a high winrate if you want to see your account grow.
High winrate means you should have a proven and tested trading system with good results otherwise you will only lose in binary options. Just keep this in mind. In the above binary options strategy there can be whipsaw. In order to avoid whipsaw we only trade when we have a candlestick reversal pattern. This ensures that we are trading in the direction of momentum.
Just like forex, you should follow risk management strictly in binary options trading. At no point of time you should risk more than 2% of your account equity on a trade. Let us make this clear with an example. Suppose you have $500 in your account as equity. You are only going to open $10 trade. When you grow your account to $1000 then you will increase the trade size to $20. Following risk management strictly ensures that you avoid taking a catastrophic loss. There is no big home run in binary options trading. All trades have the same return. Only consistent winning will make sure that you are going to grow your account. So you need a lot of discipline when it comes to trading binary options.
Having said that, you should first practice the above binary options strategy on demo account. Make sure you get the hang of it and know when you enter. In trading binary options there is only one thing: correct entry. After that the trade is set and forget. So focus on making correct entry. Ensure that you enter at the right time because timing is everything in trading binary options.