This intraday binary options strategy is used to trade price reversals. Often, this method will identify a reversal even before a shift in market sentiment has occurred. Candlesticks are used to pinpoint the upcoming price action, with both the stochastic indicator and Bollinger bands being used to provide the signals for market entry. Some previous knowledge of how to use these indicators within a MetaTrader chart is going to be helpful.
What you’ll be looking for is the point where the uppermost tip of the second candlestick is lower than the uppermost tip of the first. For day two, you’ll be watching for the lowermost point of the second candlestick to be higher than the lowermost point of the day one candlestick. When the stochastic indicator is showing overbought conditions and the intraday candle appears at the top Bollinger band, a decrease in the asset price is being indicated. In reverse, these conditions indicate an upcoming price increase.
In writing this method may sound complex, but within your MetaTrader, or similar chart, you’ll be able to visually see all of this price action taking place. Within this chart, entry signals are going to be quite clear. However, they aren’t going to be extremely helpful unless the actual price action is paired with the correct type of binary options trade. Call or Put trades typically work best with this method, but they are not the only option that can be used.
For basic trades, whenever the intraday candlestick forms at the lower Bollinger band while the stochastic is showing oversold conditions it’s time to trade. Here you would purchase a “Call” option and expiry time frame of 2-3 days. When opting for a No-Touch trade, the entry price should be roughly 50 pips less than the current market price and moving in the direction of the target price. Here again, a 2-3 day expiration period will be the appropriate selection.
One Touch trades will work a bit differently. With these the entry price should be chosen from within the range of prices that extend from the middle Bollinger band to the current market price. Here, the expiry selection should be at least four days as to allow enough time for the asset price to touch the target. In most binary options platforms, One Touch trades automatically come with a mandatory seven day expiry period. This expiry period will work well in conjunction with this strategy.
The use of Bollinger bands in conjunction with a stochastic oscillator will help to reduce the number of false signals. However, there is room for error when using this strategy, particularly if the actual time of expiry is positioned near the release of any associated economic or financial report. Be sure to check your economic calendar prior to selecting the expiry time. The one exception would be One Touch trades. With this type of binary options trade, major market news could provide a strong price push that would allow the asset price to touch the target.