This binary options trading strategy is designed to help you purchase the right binary option at the beginning of a trend, making it a useful addition.
How the Strategy Works
This binary options trading strategy should not be used very often, as only 30% of the time is spent in a trend for financial instrument price movements. The remaining 70% of the time, the price moves within a trading range between support and resistance levels.
Most traders prefer to make trades during these trading ranges, but this does not mean that trends should be ignored when support and resistance levels are broken. In other words, the price is clearly moving up or down. This strategy uses specific trend signals that indicate market entry points after a new trend forms, along with capital management techniques to minimize potential losses.
Tools:
- Two charts – 10-minute (M10) and hourly (H1)
- Moving Average with a period of 200
- Slow Stochastic with a period of 14
Trading Strategy Algorithm
1. First, identify the trend by comparing the 10-minute and hourly charts. If the price is above or below the moving average on both charts, then we have an uptrend or downtrend.
2. Next, determine the entry point (moment to buy the option):
- On the 10-minute chart, the price should be no more than 20 points above the moving average for a call and no more than 20 points below for a put;
- The solid line (fast) Stochastic should cross the dotted line (slow) below level 20 for a call and above level 80 for a put.
Thanks to this, we can identify the following moments: the currency is currently in a short-term downtrend or uptrend, the movement of the currency has slowed slightly with a small pullback and the intention to turn back to continue the trend. In the Stochastic, the fast line crosses the slow, dotted line, showing a higher high, even though the price is within 20 points of the moving average.
3. Catch the trend – when the price moves beyond 20 points from the MA200 moving average, we place an order in the direction of the price movement (likely direction: a pullback with continuation of the trend, short-term trend, which we determine as described above).
This binary options trading strategy is quite risky because catching a trend is more of an art than just using technical analysis knowledge. Therefore, be cautious and do not forget about money management, which, with proper management, will allow you to stay in the market even after a series of unsuccessful attempts. Do not trade more than 2-3% of your deposit. That is, if you have $1000, the volume of your asset should not exceed $20-$30 per option.
FAQ
What is the ‘Catch the Trend’ binary options strategy?
This strategy helps traders identify the right moment to buy a binary option at the start of a trend, increasing the chances of successful trades.
How does the strategy work?
The strategy uses two charts (M10 and H1), a Moving Average with a period of 200, and a Slow Stochastic with a period of 14 to detect trend changes and entry points.
What are the risks involved?
The strategy is considered risky because catching a trend is more of an art than a science. Traders must use proper money management and avoid risking more than 2-3% of their deposit on each trade.
