Oscillators And Convergence Theory For Binary Options

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Levels of support and resistance way to make money on binary options

Binary options and the levels is a separate set of strategies, the use of which in combination with the simplest technical indicators gives almost 90% of the performance. The only difficulty is determining the exact levels of support and resistance on different time frames. Error can lead to incorrect prediction so the trading strategy are complemented by indicators. Based on the boundary lines separate tools are composed — the “iron” levels, Fibonacci levels and other individual programmable indicator strategy. About the strategies based on them read more.

Rules for constructing levels in binary options

The principle of trading by binary options levels is that the trader analyzes the market on various time frames — large (full-temporal) and small (5-15 minutes). The period in the daily chart — year to minute — at least a month. On both charts the lines of support and resistance are drawn. Tactics are built on the following principles:

  • with high probability the price will stay within a narrow corridor bounded by borders. Possible small sample and the correction, because the system is based on placing a long timeframe. If the price runs from one border to the other in 15 minutes, the optimal expiration time — 8-10 minutes;
  • sooner or later there is a break. The task is to feel it and capitalize on the strong emerging trend.

To determine the breakdown of the iron levels the Line tool and confirming oscillators are used.

Strategies based on levels of support and resistance

Fibonacci Levels

Building a trading system based on the patterns. And if may seem that there are no regularities in the construction of lines of support and resistance, the mathematicians believe otherwise. Technical analysis is all built on mathematical models and formulas. And even if they do not always work, they are definitely more effective than probability theory.

It has long been observed that many natural phenomena evolve with a certain dependence. The proportions of the parts of the human body or plants formed in accordance with the ratio of 0.618. The numbers are not quite round, but rounding them is not recommended. The study of such ratios and proportions allowed mathematicians to create a sequence of numbers that in part reflect this dependence.

The Fibonacci sequence is a sequence of numbers, which reflects the price levels. Transcript of the boundaries is the following:

  • 23.6% — the first price value for which price may slow down or show local correction. Most often this value is not an obstacle for the trend, but may signal a potential change in direction. It is better not to open the trade, since the direction is difficult to predict;
  • 38.2% — area, in which you can open trades. Is a strong value in determining resistance and support. Once price direction will be clear, open a binary option with an expiration period of 1-3 hours;
  • 50% resistance line. Here is likely to be a rollback. Pending orders are the major players, the closure of which will turn quotes in the opposite direction. Here you can take the risk to open a non-standard option for touch (bounce);
  • 61.8% — the reduced target point. As practice shows, this way reach only the strongest players. The growth rate decays, and a breakdown means the beginning of a new strong trend. The use of this information allows you to adjust the trading system towards the direction of the price. If the rollback does not happen, we can safely open a binary option for purchase;
  • 76.4% of these put the safety stop-loss. If this price limit is breached, the binary option for purchase should be put with an expiration period to a value of 100%;
  • 100% — round target point, which will likely be a complete rollback of the trend. You can trade for a reversal.

Using these values, you can construct separate indicators for binary options working no worse than moving averages and other technical analysis tools. Fibonacci retracement levels show you possible turning points and potential magnitude of correction. The larger the timeframe, the greater the resistance these levels have. And now about how to use these levels.

Principles of trading on Fibonacci levels:

  • waiting for the appearance of a new trend after the correction and wait when price increase strikes a value of 50%. Mentally we put a bound on the value of 61.8% (iron level);
  • border of 61.8% means more probability of a reversal. If it happened, you can open a binary option on the slide and use the power of the movement;
  • a perfect level – line, which was tested a few times, but not broken.

Basic errors when trading on Fibonacci levels:

  • binary turbo options trading. No tactics, built on the patterns will be working over short time intervals. Expiration — at least 3-4 bars of working timeframe. The less time analyzed chart, the less accurate signals to win back the price momentum instead of rolling back;
  • on short trading intervals brokers set low profit margins (70%), if the strikes are close to Fibonacci levels. Since the probability of error is also present, optimal from the point of view of risk, yield — 80% and above;
  • do not open trades on the reversal from the 23.6% level. This is likely a correction, in this sense, the market is in uncertainty and movement in the direction of 50% will mean the stabilization of the market. The only exception is a long test line, but appears very rare.

To use the Fibonacci tools can anyone who is willing all year round to spend at the computer, tracking the correction of the trend. This is probably the only drawback of the strategy. To build the levels is possible on a demo account to determine a convenient time interval and to select a currency pair that best fulfills the mathematical pattern of trade.

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Summary. Levels of support and resistance is a tool which can be used as the main tactic with confirming oscillators. Trade through the levels allows you to build a strategy to determine a strong trend and rebound in the potential reversal points. Once the reversal happens, from tested level, you can confidently open binary options in the direction of the turn. Strategies work well in volatile pairs, and also at the time of the news release, in a flat they can give the wrong signals. Flat recommend you to build levels using the Line tool and open transaction on the principle of channel tactics. If someone has comments and opinions, I invite to discussion after the article!

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Binary Options Indicators: Which ones to use?

A website called best meta trader indicators has published the results of a public poll. This poll’s question was: „What’s your favorite forex indicator?“ and it’s had more than a few thousand replies! That is quite a big number!

The results are pretty interesting and surprising (for me at least) and we will talk about it in today’s article. So get ready and let’s get straight into it.

Forex OR Binary Options indicators?

This website is mainly about binary options and their strategies, and this article and poll are about forex – that’s true. Both are two different things, however they follow the same principles.

Is the price going to go UP or DOWN?

That’s why we can use the same indicators in forex and binary options.

Download these binary options indicators for MT4

Most of these indicators are already installed in MT4 by default. But just to make sure, I have uploaded them for you. You can download them from the link below.

The most favorite binary options indicators.rar ►Download

The most favorite binary options indicator

According to the result’s of the poll, the most favorite binary options indicator is, with 5385 votes, the MACD (Moving Average Convergence Divergence.) This comes as a little surprise, as my personal guess was the the most favorite would be Moving Average or Bollinger Bands.

The full results can be found below. First comes the indicator’s name, the number in the brackets is the amount of votes received in the poll:

  • MACD (5,385)
  • RSI (4,310)
  • Bollinger Bands (4,126)
  • Moving Average (3,967)
  • Stochastic Oscillator (3,523)
  • Fibonacci Retracements (3,348)
  • Other (2,574)
  • Supertrend (2,487)
  • Ichimoku Kinko Hyo (2,484)
  • CCI (1,988)
  • Parabolic SAR (1,393)
  • Trix (1,065)
  • Donchian Channel (969)
  • Williams %R (920)
  • Keltner Channel (895)
  • Momentum (772)
  • On-balance volume (568)
  • Envelopes (500)

Strategies with these indicators

Many strategies published on this website are using one or more of these favorite indicators. You can find a few of them below.

Binary Options Fibonacci Strategy

The fibonacci retracement tool is probably the least understood, especially among the new traders. They hardly realize about the importance of having this tool by their side in order to take their trading to the next level. Retracements are one of the most prominent elements of any uptrend; therefore developing a trading strategy around this phenomenon

Binary Options ‘3’ Strategy That Works + Video

While we go haywire finding a reliable trading system, we tend to miss out on the obvious. Three indicators strategy ensures high potential profits as it produces exact entry signals confirmed by 3 indicators. Moreover, it can be used with all sorts of currency pairs. This strategy that works is based on three of the most popular indicators – RSI, MA, Stochastic

BBand Stop binary option strategy

BBand Stop Strategy is a 5 minute binary option trade strategy which uses BBand Stop alert indicator in MT4 to define ideal position to enter the trade. This indicator is used along with the Bollinger Bands. How to setup the chart Timeframe: M5 Template: BBand Stop Strategy (Download here: eDisk or UlozTo.Net) How does this strategy work Arrows (pointing up and down) will be displayed over/under

Golden Eye – Trading strategy with 80 % success rate

Golden Eye is a strategy based on the ADX indicator (what is an ADX indicator?) which is used for confirming rebounds. This strategy works well with with M15 timeframe and the trades which are opened for 60 minutes (in direction of longterm trend) or for 30 minutes (against the trend).

I have had a pretty nice profit with this strategy.

I hope I have helped you, good luck with trading!

RSI Binary Options Strategy – How It Works

What is RSI Binary Options Strategy?

How to use RSI Options Strategy?

RSI is represented as a traditional oscillator with a separate window under the price chart. Its ranges from 0 to 100 and the level of 50 usually divides the indicator’s value into two parts. Additional lines come at the level of 70 (overbought) and 30 (oversold), showing strong price movements. The screenshot below shows how the RSi indicator binary options looks like.

RSI settings for Day Trading

Thanks to a simple and reliable mathematical formula, which calculates relation of recent price gain to the latest loss in a given period, binary options traders can adjust the key parameter for the RSI oscillator – the period of calculation. The default period is 14 bars or candlesticks. For example, if the analysis is made on a daily timeframe, then RSI calculates the value in last 14 days. For the hourly chart, RSI with the same period will take into account 14 hours.
Some technical analysts use Fibonacci numbers for the period from 13 bars for fast aggressive trading approach on short-term charts and 21 bars for conservative trading method on longer timeframes like binary options daily strategy. Choosing the most efficient period depends on individual trading strategy, the timeframe and expirations time of binary options.
Another important parameter to modify is the value of oversold/overbought levels. The default and the most widely-used relation is 30/70, while some of the binary options traders prefer a combination of 20/80 to smooth the unnecessary market noise and avoid too many false signals.

Trading signals

The flexible nature of the indicator and multi-purpose application allowed binary options traders to notice several patterns on the RSI indicator window, and develop different trading signals pointing to a high likelihood of current trend’s reversal. There are four main patterns for different applications and scenarios.

Reversal signal

When an asset is trading in a sideways consolidation range without clear direction, binary options traders take advantage of RSI indicators ability to show overbought and oversold levels. Once the oscillator touched the level of 30 or 70, a trading signal occurs and the trend changes the direction. Therefore, traders should consider buying CALL options on a test of the oversold level and PUT options when RSI indicator reached the overbought zone.

Here is an example of RSI indicator range:

Overbought and Oversold Levels

During a strong trend, overbought and oversold levels can be shifted. This technique is used to measure the depth of possible retracements and corrections. For instance, when RSI bounces off the oversold zone and inches up to the level of 50, that threshold is considered as the overbought level, and new put options can be bought from there. For an uptrend, the condition is the same but mirrored. This pattern is also called a bounce by trend. An example below shows how the threshold of 50 acted as the overbought level.

Bearish or Bullish divergence

This signal occurs when the price action does not come in accordance with the RSI performance. For instance, the chart shows higher highs of the rate, while RSI oscillator draws lower highs. That contradiction is called a bearish divergence as it signals a potential reversal of the trend. Bullish divergence happens when the price of an asset charts lower lows but RSI prints higher lows. Bearish and bullish divergences are usually strong and reliable reversal signals.

Swing rejection pattern Example

This is also a reversal signal, and it has four stages of the action.

Best RSI settings for Swing Trading:

  1. RSI drops to oversold zone as the sequence of strong downtrend;
  2. RSI edges back above 30;
  3. RSI falls again without entering the oversold zone;
  4. RSI breaches the recent peak value.

Best Indicators Combination in RSI Binary Options

Stochastic RSI

This is a combination of two oscillators in one window. Besides the RSI, here is used also usual Stochastic oscillator. The Stochastic RSI indicator has similar patterns as described above with the addition of another line. A crossover of two lines is considered as a confirmation trading signal as well. Both indicators parameters default on the chart below, however, traders can try to modify settings in order to get one of the oscillators slower than the other. That would reduce the frequency of trading signals but increase efficiency.

If you like this strategy, you might also be interested in this Triple Top and Triple Bottom

MACD vs RSI

One of the most popular combinations in technical analysis MACD and RSI. The main advantage of such an advanced RSI strategy is that it combines a slow trend indicator MACD with lagging performance and fast RSI leading oscillator. In this case, bearish or bullish divergence on the MACD indicator has to be confirmed or denied by fast RSI. Once a confirmation signal occurred, it’s time to enter the market, buying call or put options depending on the trend direction.

An example is shown in the chart below:

If you like this strategy, you might also be interested in this Reversal Trading

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