Touch or No Touch binary options are well-suited for trading with asset prices that are currently ranging. The simplest way to determine whether or not an asset price is ranging is to look at a basic price chart. If range-bound conditions are prevailing, you will notice very little in the way of price movement. However, to accurately predict whether or not the market will continue to range, a Moving Average Convergence/Divergence (MACD) indicator should be used.
An incredibly flexible indicator, the MACD is typically utilized by traders for recognizing changes in price trends and traction. Having said that, the MACD indicator can also be used to help you to identify a ranging market. In order to accomplish this, you’ll need to make some slight modifications to the MACD histogram by incorporating 2 additional lines higher than and lower the zero line.
The line values, 0.0005 and -0.0005, will depend primarily on the decimal places included within the chart that you’re using for analysis. If your charting platform shows 5 decimals places, then the lines need to be up to 4 places. Once these 2 lines have been added, any price action that remains close to the zero line and in between the 2 lines (above and below) is a sign of ranging conditions. Once the prevailing movement has been identified, you can begin planning your trade.
One of the best things about employing this binary options strategy to identify ranging markets is the simple fact you are able to do trade while analysis is ongoing. Range-bound conditions can continue for quite some time, especially when there is little in the way of market news to shake things up. This means that multiple profit opportunities may present themselves. As soon as you are positive that the market is ranging, you can move on to locating the resistance and support levels via the use of Bollinger bands.
After confirming that the market is indeed ranging, you’ll need to establish the range of prices that the asset is moving within. These will be the support and resistance levels. Even though the Bollinger bands are used to determine just how volatile price movement is, the two bands also point out the boundaries of the ranging market. Consequently, the upper and lower bands can be used to establish the support and resistance levels. After you have accomplished this, what you will have is a pair of strike prices to work with. The final step is to select the type of trade you want to use and execute it.
Due to the fact that two indicators are used to help you affirm the market condition, this strategy provides you with very dependable signs for forecasting price movement. Another important benefit of utilizing this strategy is the fact that the Bollinger bands outline the strike prices for you. Rather than guessing at those, you’ll be provided with a close approximation of what the strike prices should be, and this in turn will help you to win more binary options trades.
Moving Average Crossover Binary Options
When a second signal line is imposed on the MACD chart, the potential for MACD crossovers is created. When using the MACD, having a clear idea of what a crossover is, and how it signals an entry point is a must. To be clear, the crossover point occurs where the MACD line and the signal line cross paths. There are two types of crossovers: bullish and bearish. When the MACD line crosses the signal line starting below it, and ending above it, this is a bullish move and indicates that prices are moving upward. If the line starts above, and ends below, this is a bearish move and indicates that prices are moving downward. When a signal is bullish, go with a call option. When bearish, go with a put option.
The shorter the timeframe you are focusing on, the smaller you will want the two different moving average lengths to be. Many traders use a 12 and a 26 day exponential moving average. The signal line is a 9 day line. This can be customized as needed, and this can be tricky, so it’s best to practice quite a bit with this trading strategy before you roll it out in real time. The 12, 26, 9 day strategy is typically effective for trades that are open for an hour or more. Less than this, and you are just guessing.
One easy way to gain an edge when using the MACD crossover strategy is to use it in conjunction with a candlestick chart, so you will want to be sure that your charting package allows you to do this. When you use a candlestick charting methodology, you can more easily visualize what the asset you are looking at is doing in real time. Just looking at two lines doesn’t give you a feel for the little things that go on in the minute by minute, hour by hour timeframe, but the candlestick chart on top of the MACD and signal lines will give you this info. Once you become familiar with the different candlestick signals, you will be gaining a second way to verify whether or not a trade is a good idea or not. They are both technical indicators, but two tests for trade validity that agree are better than just one test that has not been confirmed.
The MACD crossover trading strategy can be used for any type of asset. It measures momentum, but when coupled with the price monitoring of the candlestick chart, you can pair price and momentum and get a fairly accurate measure of the future.
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