Like many, this binary options strategy focuses on trading along with a price trend. Since it is quite basic in design, it can be used by beginner level traders who have mastered chart usage. Three time-frames are taken into consideration, all of which are short-term. Although the signals are derived from smaller time-frames, their validity is backed by the underlying trend that has been in place for a longer period of time.
The time-frames that will be selected within your chart include the 4-hour, 1-hour and 5-minute. The simple moving average single indicator is going to be the 60-bar. Price movement is going to be recorded for all three of these time-frames, with the search for an entry signal beginning with the 4-hour. Within the chart, check to see if the current asset price is above the 60-bar SMA. If so, market conditions are bullish and a signal is possible.
The next move will be to the 1-hour chart. Repeat the process, checking to see if the asset price is above the SMA. If this verifies, you’re final check will be the 5-minute chart where you’ll once again want to see if the price has crossed the SMA moving upward. If all three time-frames provide the same verification then the conditions are met and it’s time to purchase your binary options contract. The correct selection will be that of downward price movement, which could be Put, Under, or Low, depending on which platform you use.
If you are not able to verify the SMA cross in the 1-hour chart, go back to step one and start all over again. If the 4-hour and 1-hour verify, but not the 5-minute, go back to step one and start over again. The power of this binary options strategy lies in the fact that the price trend must be verified on three different occasions before trading. Any shortcuts will only reduce the overall accuracy and success rate, so do not be tempted to skip past any of the steps.
Conflicting signals are eradicated when using this method and this is a plus. There will be the possibility of an even stronger price trend taking over, so consider looking at longer time-frames such as 24-hours and one week when this is a concern. The expiry time selection should be anywhere from five minutes to four hours. The price action could continue on past the 4-hour mark, but the accuracy of the signal decreases as time goes on. This SMA binary options strategy has long been used by traders and should not pose any serious challenge to novice traders.