Binary options: strategies, indicators, signals

A binary option, despite the use of the same instruments as currency and stock markets, has a feature - the transaction is limited in time, after which it is automatically closed (expiration) in profit or loss.

Thus, the options trader can’t wait endlessly until the price reaches the desired level. Add to this the inability to prematurely close a wrong position or place a pending order. Before how to make money on the binary option you need to carefully choose a strategy and technical indicators.

Workspace

Most binary trading platforms work online, and any computer settings and browser versions may not give acceptable speed. Delays in processing trade orders can be made intentionally to slow down the opening of short-term (turbo) options, but each case should be dealt with separately.  Choose the fastest available Internet channel; add a backup from another provider!

The next problem is the limited choice of tools for analysis in the terminals of options brokers. For a quick start, there is a minimal set of technical indicators, but it is always better to be able to add your tool or change the standard one. The following workspace option is recommended: on the broker's platform, we only open/close options, and for analysis, we use an advanced trading platform, for example, MetaTrader in the picture above.

Binary option strategy

If you watch ads on the Internet, binary options trading is impossible without the use of "special and proprietary" strategies. The main argument is the existence of expiration as a factor that makes it impossible to use standard tools.

There is some truth in this statement: the limited time of the transaction at first cause’s difficulty, but not to the extent that you do not use proven tools. Moreover, in addition to the analysis of historical data, there is no other method of forecasting the market, so do not be fooled. All used strategies can be divided into the following groups:

1. Using technical and graphic patterns. 

The same methods are used in the foreign exchange and stock markets:

• Candlestick and technical patterns are found and traded: “Head and Shoulders”, “Flag”, “Doji”, “Triangles” and others.

• Breakouts and rebounds of strong supports/resistances and price levels (Fibonacci, Pivot Point, Murray and others). Work well for short-term and turbo options lasting 5-10 minutes. It is important to verify the truth of the breakdown or rebound, there should be at least 2-3 retests of the level before opening an option!

• Trend indicators: moving averages, overbought/oversold oscillators (MACD, RSI) which determine the medium and long-term trends. Used as confirmation of signals from graphic patterns.

All used tools in binary options strategy should have a minimum delay!

The example of opening options on standard technical indicators: Bollinger Bands, MACD and Parabolic SAR:

Important: to improve the accuracy of the signals, you may need to adjust the parameters of the indicators for the timeframe, asset and option type.

2. On stock options.

Big players (market makers) always know at what price levels and what volume options are open. This information can confirm indicators, binary options signals or can be used as a separate strategy. In all cases, a reliable forecast can be made in the medium term.

The source data is in the public domain and the most widely used daily reports are Chicago CBOE (Chicago Board Options Exchange) and CME (Chicago Mercantile Exchange). Programs have been developed for working with reports directly in the trading terminal.

3. News trading.

Fundamental events give sharp price impulses or even a complete reversal of the trend. News binary options strategies despite complexity give a good and stable profit: the date and time of publication do not change, according to historical data it is possible to estimate the dynamics and time of the market reaction, and therefore most accurately set the expiration. In the picture above, the example of CALL-option on UK news

If a broker allows at time of publication of news, you can open two options "Touch/No Touch" above and below current price. Look at the statistics-there should be a multidirectional movement of the market.

Important: the economic calendar is also read by brokers who are not interested in significant losses if most traders manage to open in the right direction. You need to be prepared for unpleasant surprises, such as an increase in delays in opening and closing trades, a decrease in the premium on options or even a complete disconnect from the trading flow.

4. Hedging.

It is used by market makers to cover possible losses on stock and currency assets. As such, the profit from the option is not considered as the main objective.

Indicator for binary options

When using indicators an exact binary options strategy, remember that many have such an unpleasant property as redrawing, when the closing of the current candle can change past calculations.

Redrawing is especially visible on arrow tools, which look perfect in history, but in the real market, problems begin: arrows appear and disappear; there are multidirectional signals on neighboring bars and other oddities. All this is the result of redrawing, which is difficult to identify without careful testing.

In the picture below the tools without redrawing: arrow indicator and moving Average strategy with two oscillators!

60 seconds profits

One of the most popular indicators for turbo options - opening transaction when an arrow appears. As a signal confirmation, additional indicators are used, which are modifications of the standard Stochastic (60s Binary STO) and RSI (RSX). The arrows themselves appear at the intersection of Moving Averages, so there is no redrawing.

MACD+RSI

The combination of two standard technical indicators gives a stable profit for all types of options. Using RSI allows you to almost completely remove delay - the main drawback of Moving Average and detect advanced signals in the early stages.

Binary option signals

Automated trading is well known to traders trading in currency pairs, stocks and futures. So it is no great surprise that services have appeared that provide paid and free signals.

You can test free binary signals yourself, and as for paid services, pay attention to the availability of such information:

• The promise of quick profit is greater than that of large hedge funds and investment banks where experienced traders have analytical departments and access to insider information.

This advertisement is misleading for newbie’s. All financial markets are high risk and there can be no guarantees on them!

• Automatic strategy for binary options is advertised by the broker or connected immediately after opening a real account. While the broker takes a commission from each transaction, it is difficult to imagine his interest in constantly profitable trading clients. Moreover, the profit is paid from the funds of the losers, and if the majority is in the black, it will be necessary to cover the deficit with their own funds.

• People in binary option bot advertising can be fictitious personalities, which will be a complete deception to future customers. The result is always the same: quick loss of deposit.

It's fair to say that not all robots are equally «optimistic». There are services that indicate the percentage of profitable trades at the level of 50-60%, although experienced traders know that for binary options you need at least 70-80%, otherwise it is impossible to compensate for the inevitable errors. If you decide to use binary signals, choose a service without unnecessary promises, use them only as an additional confirmation of your own ideas!

Let's summarize. Binary options trading can be profitable, but when choosing a strategy or indicator, always remember that apart from technical analysis, no other methods have been invented to predict future price movements with sufficient probability. Even high-speed robots (HFT) use the same historical data and statistical methods as when manually opening positions. Remember, when learning how binary options signals work, what there are no special tools for option trading!