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Breakout strategy for binary options trading

Experienced traders believe that “trend is your friend”, but do you believe it? Traders need to employ a set of strategies and choose the most effective ones. An effective breakout trading strategy entails two main aspects. The first aspect is identifying a more appropriate breakout level. The stronger the chosen level is, the more likely a trader will be to experience a strong move. As such, you should come up with comparatively strong market levels. Some of the levels that have proven to be more successful are the ones that have previously offered resistance/support.

With the breakout strategies for binary options traders have to identify the breakout level, predict the break, and then enter the market after the direction of the breakout price is confirmed.

You should learn to predict and take advantage of the break! However, most traders do not apply such approach because they cannot determine the point of reversal. If you learn the strategy described below you will be able to pinpoint changing trends easily and timely.

How to set up trader’s terminal for the “breakout” strategy?

To apply the “break out” strategy, you need a candlestick chart and two indicators: SMA and RSI.  You should activate those indicators in the Pocket Option terminal menu.

Change you chart to the candlestick chart and apply 15-minute period.

Apply the following settings for the indicators:

  • Set period of 10 for the SMA;

  • Set 14 periods for the RSI. Change level 70 to 50. To remove the level uncheck the corresponding box.

With recommended settings the moving average is used as a trend line, and the “Relative Strength Index” is used as a confirmation.

Changes in the market are marked by the moment of breakdown of the main trend line: resistance in the case of a downtrend, support – an uptrend. However, sometimes there are times when the price bounces off and comes back. In other words, traders need to filter false signals. Use the RSI to check the signal.

How to buy contracts with breakout strategy?

Congratulations! You set up your trading platform and you are ready to trade. The strategy works best on European and American currency pairs.

The break of resistance level is a clear signal of an uptrend. This means that the price will increase. In case of uptrend you can implement Breakout Strategy for Binary Options and create CALL orders. The trend should do the rest and you should enjoy your profits.

If there is a break of the support level the market is in downtrend or bearish. Such situation is perfect for creation of PUT orders, since you are expecting the price of an instrument to get lower.

The basic algorithm of steps is as follows:

  • CALL option when an upward candle breaks a moving line from bottom to top (a change in a downward trend) and the RSI signal line rises above 50.
  • PUT option when downward candle breaks a moving line from top to bottom (a change in the upward trend), and the RSI signal line drops below 50.

Open the contract not at the moment of breaking the SMA! Wait for the next candle to open after the one that broke the line. Trading is conducted on 15-minute; the expiration period is set at 30 minutes. It should equal the time for the formation of 2 candles.

The Breakout Strategy provides in trading binary options comparatively few trading opportunities. But it is also an excellent addition to trading with the trend following strategy and the strategy with support and resistance. As you could see, the strategy is easy and working. It is important to make correct analysis and wait for levels to be broken before implementation of this strategy as well as not be fooled by false breakouts. False breakouts will bring you a lot of pain and lost money. Furthermore, you should keep in mind news that can come soon.

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