Moving averages help traders to measure price trend and the overall strength of the market and for that reason are an excellent tool for binary options traders. MA’s assess the average asset price and can used with various time frames. They may also be controlled in a number of ways, building the foundation for technical analysis. The moving average generates data that when compared with prices measures the trend. When using exponential moving averages the most recent data holds more weight than the older data. EMA’s can be more powerful than MA’s which value all data equally.
This type of trading makes use of a 30-day EMA and a pair of time-frames. The first time-frame will be longer than the second, thus establishing the underlying trend. If on a 24-hour chart the asset price is above the 30-bar, the trend is said to be bullish. If below, the trend is said to be bearish. Exercise caution, as you need to note where the price is in relation to the long-term trend. For example, if price is higher than the moving average and has been so for quite some time, the asset is like to run into resistance at some point in the near future. Support and resistance must always be accounted for, regardless of which method you are using.
Once you’re able to locate the underlying trend, double-check to ensure that it is not likely to hit resistance and reverse. With this verified, turn your attention to 30-minute bars. Look back over the past price action of the previous two weeks to determine where the asset price has been and then compare this information to the price action of the past 2-3 days to verify support and resistance levels. This can be done using the charts provided by your binary options broker, a MetaTrader chart, or any other chart that allows you to view past price action.
The signal is provided whenever the asset price bounces from or moves above the 30-bar EMA. Be watching for this price action on the 30-minute chart. Note that this can take some time and it is possible that a signal will not develop on certain days. Other days you might see several. In most cases you’ll need to select an expiry of 1 to 4 hours. If the asset price is close to reversal, opt for a shorter expiry time. Under bullish conditions, whenever the asset price crosses the bar from below or is above it and then retracts, that will be the time to purchase your position.
This binary options trading method is one of the most solid paths available today. Additionally, it is relatively simple and should not prove problematic for novice traders who have familiarized themselves with technical analysis charts. Moving Averages can be applied in a number of ways and this is just one of them. There are more complex methods that make use of MA’s and EMA’s, but if you’re just getting started with your trading career, consider leaving these for a later time and starting out with simple strategies such as this one.
***Your capital may be at risk. This material is not investment advice.***
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