When it comes to trading binary options, certain timeframes have higher degrees of certainty than others. As a general rule, the ultrashort term trades are more highly unpredictable than longer trades, up until a certain point where long term trades start to lose certainty off into the future. The Sunday Afternoon strategy—called this because this is right when Asian markets open up for the week if you live in the eastern portion of the United States—relies on the sweet spot in the middle of these expiries for it to work. Here, you do not want a timeframe that’s too short, or an expiry too far in the distance. The ideal timeframe for this method to work is between 15 and 30 minutes. Let’s take a look at how you can best use this to your advantage.
When do You Apply this?
First, you should start your research for this strategy on Sunday’s, preferably a few hours before Asian markets open. It can be used on currencies, stocks, or indices, although many traders find that it is most successful in the Forex market. Your goal is to identify assets where a trading gap might occur. Sunday afternoons are the timeframe when this is most probable to occur simply because trading has not taken place for a while at this time.
If you can find a price gap between the closing price from the previous session to the opening of the current, your next step is to identify
strength. The RSI indicator is a good tool here. Basically, what you’re looking for is for a price chart to show something out of the ordinary. If prices were trending downward at the end of the last session, yet for an inexplicable reason prices have jumped sharply, you should be looking for put options to compensate for the reaction of those that see that prices are higher than they should be.
Here’s an example. If you’re looking at the AUD/JPY, and prices have suddenly opened up 100 pips higher than they closed, and there are no extenuating circumstances to cause this fundamentally, you can expect the price to drop. Let’s say prices closed at 86.9900, and then they’ve opened up right at 87.0000, you can expect there to be a sizable drop in price as the market seeks to correct themselves. It’s important that you act as soon as markets open so that you can jump on the sudden downward push and take advantage of it before it ends and true value shines through. For this reason, trades should not be shorter than 5 minutes, and they should not be longer than 30 minutes. This allows psychology to play its role, with little regard for the true price that the pair should settle at.
As you might have guessed, this is a strategy that can be used for both put and call options. To use this in a call binary option setting, the opposite situation of the above example should be present.
It Doesn’t Work all the Time
This is not a strategy that you can use every week. When it is applicable, it should have a high rate of success, but it’s not perfect. Initial reports on limited sample sizes give this an accuracy rating of about 80 to 85 percent. That’s more than enough to be profitable, but do expect there to be losing trades once in a while.
Another big drawback to the Sunday Afternoon approach is that you need to be well versed in multiple currency pairs. Having the software up to look at several charts at once is needed in order to give you as many trading opportunities as possible. If you are just watching two or three pairs, it’s possible that you will not make more than one or two trades a month, which can hurt your profits a lot. However, do note that watching multiple charts at once does open up the door for a higher risk of error on your part.
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