Today, we want to focus on an advanced binary options strategy that is specific to 60 second binary options. It’s called the 60 second engulfing pattern, and it is quite effective for intermediate to advanced binary traders, depending upon their experience with ultra short term binaries. If you’ve never traded these before, you will want to take a few hours to practice on a demo account before you begin using this technique just so you are a little bit more familiar with the specifics of how these fast paced trades work.
How Does One Apply this Method?
The engulfing pattern utilizes the candlestick charting technique, and it is one of the most reliable indicators that a change in trend is about to occur. Recognizing the pattern is very easy when you use a candlestick chart because of the different colors. When you have an asset that is moving upward in price, you will find that most of the candlesticks that are appearing are white. You will have a line with an upward trend consisting of mainly white candlesticks, and then, up at the top, there will be a big black candlestick that completely covers the body of the last white one. This is the bearish engulfing candlestick and it usually means that the price is about to drop. There is also a bullish engulfing candlestick where the price is dropping and the last black candlestick is completely covered, or engulfed, by a big white candlestick. This means the price is about to go up.
If you’ve never used candlesticks before, they are a huge part of technical trading and they are a great measure of what consumers are thinking. They show all of the same information as a line chart, but with some added features. And because they are color coded, they make it much quicker to analyze a chart and get a feel for what sessions are like in between the distinct timeframes that are measured. Because they rely heavily on trader emotion, they are a good tool for evaluating the ultra short term, and this is why we have this method coupled with 60 second binary options.
This method works under three main conditions: there must be a distinct trend, there must be two candles at the end of that trend of different colors, and the second candle must absorb the first in size. If you have these three, you have the basics in place for a trend reversal.
Yes, there are Drawbacks
This method, like any other method of predicting the movement of price, is not perfect. The main drawback is that the reversal that is likely to occur does not have a guaranteed length of time to go with it. This is why we use 60 second binaries. The reversal could last a few seconds, it could last for hours. There’s not really a good way of knowing. Statistics say that they last more than two or three minutes most of the time, and to cover ourselves, we use the smallest timeframe that is most widely available: 60 seconds. If you want to customize this for another timeframe, you will be increasing your risk. So even though most brokers do not pay a lot on 60 second trades, this is the safest moment of expiry for you to choose from for this particular method.
The other drawback is that it is something that you need to act quickly upon. The moment that the chart shows an engulfing pattern, you need to act. If your computer is slow or there’s a lag in your charting package, this strategy will not be effective. If you don’t have the right tools and equipment for success, do not use the engulfing strategy for your trading. Trader emotions can be fickle, and the trend could very easily last only a minute. If this happens, by acting too slow you are losing money, regardless of how good your data and analysis might be.
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