15 Min Binary Option Trading Strategy

Terminal Updated on Baronial 25, 2016 by

This commodity discusses why candlestick trading is an ideal way to trade binary options.

Viewing cost action in the form of Japanese candlesticks was popularised by Steve Nison. Candlesticks are now the default view in most trading software and glancing at a chart shows why.

The use of colours to distinguish bull and bear bars makes them piece of cake to identify.  The charts make a articulate contrast between the existent body (between the open up and shut) and wicks (between the high and depression)

Automated Trading using Candlestick Charts

Candlesticks are not but useful for viewing the markets and getting a quick agreement of price action, they as well are piece of cake to comprise into automated trading systems.  Automated trading relies on the designer being able to replicate what is happening on the screen into a series of logical steps.

Candlestick charts are synthetic using open, high, depression, close price data and many patterns will use only a few bars of information.  They are therefore much easier to program compared to systems that rely on data from many bars.

Candlestick Trading for Binary Options

Options were developed to allow investors to hedge risks in a portfolio.  Purchasers of an pick take the right to buy or sell the underlying musical instrument at a sure price earlier a certain time.  For investors, options act equally a course of portfolio insurance.

Traders buy and sell options to make a profit from market place moves and market volatility. Options allow traders to take advantage of margin to make bigger profits and losses they would do by trading the underlying instrument.

Binary options look similar to traditional bets.  Trading a binary option risks a set amount of upper-case letter and wins a ready amount.  With an 80% payout a binary option merchandise of $100 risks $100 and wins $fourscore.

The most pop type of binary option trade is the Higher-Lower trade. To win the trader must correctly approximate whether the market volition be higher or lower than the electric current cost at a set time.  This blazon of bet often has a payout around eighty% and so the trader must be correct more 55.5% of the time in lodge to be profitable.

In normal trading, a winning percentage of more than 55.5% would be easily attainable, still, for binary options the problem is that the trade will elapse at a fixed fourth dimension. Therefore whatever trading strategy must accept account of the fourth dimension chemical element.

Candlestick trading is one way to address the issue of timing.

A Candlestick Trading Strategy

I have come up with a trading strategy that is simple to employ and deals with the issue of timing past trading ane bar ahead.  Therefore the strategy will enter at the close of a bar and exit at the close of the following bar.

Equally you will run across when you spotter the video below, the trading strategy has been profitable over the by 4 years on the EUR/USD xv minute timeframe.  The trading strategy is a reversal strategy.

Trading Rules

• Long trades require 3 consecutive lower bars.  Brusk trades require iii consecutive higher bars.  All of them with a minimum trunk size that can be varied.
• quaternary candle must be a Doji with a minor trunk. Doji body to exist a minimum size that can exist varied.

Video Describing the Trading Strategy and how it can be Backtested

Using Excel to Backtest the Binary Selection Strategy

Microsoft Excel is a very useful tool for backtesting trading strategies. Binary options are comparatively elementary fashion of trading and are ideal to be backtested using Excel. Excel tin handle quite a lot of data, in the video above I am testing 100,000 fifteen minute periods.

Formulas:

In the video I showed how the rules for this elementary candlestick strategy tin can be programmed into Excel.  I did this using an IF statement

The long trades were opened using the post-obit:

S67=IF(AND(B67=B66,G64-G65>$AD$61,G65-G66>$AD$61,G63-G64>$Advertising$61,ABS(D67-G67)<$Advertizing$sixty),”long”,””)

Curt trades were opened using the post-obit:

X67=IF(AND(B67=B66,G65-G64>$AD$61,G66-G65>$AD$61,G64-G63>$AD$61,ABS(D67-G67)<$Advert$60),”curt”,””)

Results

How to Ameliorate the Strategy

In the video I discuss a number of ways that this trading strategy could be improved.  One time we take the basic model in Excel, information technology is easy to alter variables to refine the strategy.

1. There are ii variables congenital into the strategy.  The size of the Doji and the size of the preceding candles.  Either or both of these could be tweaked.
2. I have set the number of preceding candles at three.  This number could be changed to four to identify a longer trend or two for a shorter trend.
3. Most dojis take a small-scale body, the colour of this could be used to identify preferred trades. For example a ruby Doji may be more than assisting for curt trades and a green Doji may exist more profitable for long trades.
4. The trading strategy does not distinguish betwixt types of Dojis.  Different shapes of wicks give the blueprint a different await.  Hanging man or meteor patterns may be more profitable.
5. The profitability of the design may be affected by the preceding momentum.  We could examination whether the design is more effective in a downtrend or an uptrend.

Use Excel to Backtest Trading Strategies

If you are interested in using Excel to backtest trading strategies my Ebook grade: How to Backtest a Trading Strategy using Excel is available in the Amazon Kindle Bookstore.