EUR/USD Strategy for Short Time Frames – America vs Europe Round 1
Full Review of the EUR/USD Binary Options Strategy for Short Expiries
Most strategies you find on the internet were designed for forex and then applied to binary options. This is one strategy that has been created specifically for binary options trading. It uses two approved indicators to confirm signals that could result in profits if used correctly.
BinaryOptions.net Simple EUR/USD Strategy
This is another trading strategy offered by BinaryOptions.net(BO.net for short). BO.net is one of the leading binary options information sites, behind BOTS of course, that you will find when searching the web. This strategy is listed as a simple strategy for trading the EUR/USD. The focus of this one is on the EUR/USD because it is the most heavily traded pair in the forex markets, making it extremely liquid and less subject to unexpectedly volatile movements. Other reasons for choosing this asset is because it trades nearly 24 hours a day and usually has good pricing when compared to other pairs.
How This Strategy Works
This strategy is intended for using the high/low and touch/no touch types of binary options. It uses MACD and PSAR for signals and is recommend for newbies by BO.net. Analysis and trades are based on the 30 minute charts so it is a fairly short term strategy. The MACD is used as the momentum indicator while the PSAR is used to determine the trend. Both are set to the standard which is 12,26,9 for MACD and 0.02,0.20 for the PSAR.
There are two signals for this strategy, a bullish and bearish. For a bullish signal wait for the PSAR to fall below price action and for MACD to turn bullish as shown in the picture below. This indicates a bullish trend with bullish momentum. In order to take to bearish signal the opposite is true. PSAR will begin above price action and MACD will crossover from bullish to bearish. Either is a signal to enter a trade. BO.net recommends a touch/no touch for the trade presented on this chart if there is a strike price below resistance (for bulls) or above support (for the bears). The reason is that support/resistance could provide a barrier to the trade. If that is the case then a no touch position is recommended.
Why This Strategy Might Suck
This strategy might suck because it recommends using touch/no touch options. This type of trading usually comes with the highest returns but it also comes with highest risks. Because it only requires one touch to pay out the levels required are usually far beyond what you could reasonably expect the asset to move. And, if you opt to choose a no-touch because of support, resistance or other factors you’re taking the risk that the move will only go as far as your line. It also might suck because it doesn’t take longer term trends into account.
Why This Strategy Doesn’t Suck
This strategy doesn’t suck because it uses two approved indicators, has a well defined entry point and even suggest which type of binary option to trade. MACD is one of my favorite and most used indicators so I can readily approve it as a useful tool. It’s use here as a momentum indicator and confirming indication is good. PSAR is a tool I have less experience with but also like. It comes to binary via futures/forex trading and can provide good signals. Using it along side the MACD is one of many ways to improve its use for binary options. The signals of this strategy are well defined but lack the additional support of a long term trend. Saying that, each buy signal requires both indicators to confirm, thereby weeding out false signals either may give on their own. Based on the charts provided each signal indicates a movement in asset prices lasting for at least several hours if not for a day or two.
My Last Words On The BO.Net Simple EUR/USD Strategy
This is a good strategy for trading short term binary options but I have some caveats. One thing I would change is the type of option from the suggested touch/no touch to a high/low style position. The signals presented on these charts are good and resulted in moves lasting for several hours and days making them ideal for a high/low position. Using a high/low with a few hours to end of the day or end of the week expiry would result in winning trades. Something that would also help is a consideration of the underlying trend. I think if you first look at the daily charts to see what day to day price action is (up or down) and then move to the 30 minute charts and only trade in the same direction as the day to day action you will get much better results. It is simple enough for a newbie to use but since it is based on such a short time frame I am going to approve it for intermediate and above.
Further Reading:
- More on the Simple EUR/USD Strategy from BO.net
Bogdan’s Parabolic and MACD Strategy – Can Two Indicators Build a Profitable Strategy?