This binary options strategy produces trade signals via the use of the Relative Strength Index (RSI) indicator and a combination of two different time-frames. The goal is to identify and trade along with a price trend. Novice traders could struggle with this strategy, at least initially, while searching for the entry signals. To avoid serious problems, follow the steps exactly and don’t skip ahead or backtrack unless instructed to do do.
RSI Strategy Chart Settings
Your chart should be prepared in advance. Start by selecting a 15-minute and 5-minute chart. The first is for spotting the trend, the second indicates market entry. On the 15-minute chart, select exponential moving averages of 50, 21, and 5. Next, draw in your lines of support and resistance. These can come from your own estimations, or be the current levels being provided by market analysts.
In order for the RSI to pinpoint an entry point, you’ll need to change the setting to 4-bars for trend tracking within the 15-minute chart, but remember that the 5-minute chart is where you’ll find the entry signal. The stochastic indicator will also be used to provide extra validation for both market entry and exit. The use of the stochastic is optional, but the extra confirmation can make a difference in the overall success rate of this binary options strategy.
Putting the RSI Strategy To Use
Step 1: Start by looking at the 15-minute chart. If the price of your chosen asset is near either support or resistance, consider this a negating aspect for any trade signals that you see moving in the same direction. Use moving averages to pinpoint the trend within this chart before moving on.
Step 2: Check the short-term averages to see if they are above the long-term 50-bar moving average. If so, the estimated trend is upward. Should the averages be below the 50-bar, the trend is downward.
Step 3: Wait for the signal. This comes when the RSI moves into overbought or oversold areas. As soon as this happens, move to the 5-minute chart and start to look for an entry point.
Step 4: In the 5-minute chart wait for the signal to trade. The signal should be in line with the same trend noted within the 15-minute chart. If the price is close to an area of support or resistance, wait to see if the price exceeds these levels before trading. If you plan to verify the stochastic, now is the time to do so.
Keep in mind that this strategy was designed specifically for use with the five and fifteen minute time-frames. When used with longer time-frames it will be less effective. Trade signals typically arrive quickly and therefore require fast action. Also, economic and financial reports that are released around the time you plan to trade can make a difference. It’s best to not use this binary options strategy with any asset that is connected to the release of fresh report data.