The success of any trading strategy lies squarely on the shoulders of the trader and depends on their ability to effectively use it in conjunction with other forms of technical analysis. These other technical indicators can be anything from a MACD, SMA and candlestick to help establish the trend direction. The greater the number of positive indications for a trade, the greater the chances for success. While at times it appears that the signals are very good at predicting price movement, there are also times when the signals appear to have no impact at all. Like any technical tool, profits won’t likely come from relying on one indicator exclusively.
Let us discuss the Trend strategy recommended for short-term binary options. You can find all necessary tools and indicators pre-installed in the Pocket Option terminal.
How to set up the indicators for the Trend?
For the “Trend” strategy you need to open a Japanese candlestick chart on a five-minute timeframe. You can choose any high volatility stock or currency. Assets that remain in a “flat” position are not recommended for trading with the strategy.
Among all indicators, you will need to set Bollinger Bands and Relative Strength Index on the chart. You should use the default parameters. Therefore, go to the list of Pocket Option advisors and click on the name of the required indicators to activate them.
Let us delve into the role and function of the indicators in the Trend strategy. Bollinger Bands build a price channel and here you can ignore the middle line. If the indicator lines are directed upward, then the trend is upward, and if downward, then there is downtrend. The strategy is to trade lines.
RSI will be used as a confirmation signal. Trading against the main trend requires meticulous determination of entry points. That is why we use the Relative Force Index, one of the best oscillators for predicting a trend reversal.
For the strategy, we are interested in 70 and 30 – the overbought and oversold levels. When RSI crosses of one of level, it will confirm the emerging reversal trend.
How to trade with the “Trend” strategy?
Before we start trading, let us talk basic rules money management. Considering that you are trading against the main trend, to apply the Martingale rule. In case of a losing trade, you must increase the volume of the next one by 2.5 times. Therefore, it is recommended to start with less than 0.5% of your total deposit.
Now, we will explain the rules of trading according to the “Trend” strategy.
The CALL option should be purchased when the downward candlestick closes below the lower line of the Bollinger Band. At the same time, the RSI signal line should be below level 30. The trend is down.
The PUT option should be executed when the upward candlestick closes above the upper Bollinger Bands line and the RSI is above level 70. The trend is upward.
Please, remember that the Trend strategy is short-term.
The expiry date is equal the formation time of one bar. In our case, it is 5 minutes.
Conclusion
If you strictly follow the strategy, it will be effective in making a profit on binary options. The success of any strategy depends on traders’ ability to effectively use it in conjunction with other forms of technical analysis. The greater the number of positive indications for a trade, the greater the chances for success.
