Trading binary options can be a profitable business if several conditions are met. The most important of them are competent money management and a well thought-out trading strategy. Finding a strategy that generates stable income is not easy. This is due to the fact that the market is constantly changing, and what worked yesterday does not give a satisfactory result today. In addition, each trader has individual unique abilities and qualities necessary for successful trading.
There are several types of binary options trading strategies . The most famous are strategies based on technical indicators and trend, as well as strategies based on price action ( Price Action ). In the process of trading, it is recommended to use several strategies of different types. This will allow you to make a profit in any market situation.
We suggest that you familiarize yourself with one of the trending strategies called “DTL Strategy”. The strategy uses trend lines and countertrend lines (that is, corrective movement).
Characteristics of the Strategy
Analysis of trend lines
In the standard definition, a downtrend line is drawn along at least two successively declining price lows. Likewise, an uptrend is identified by rising highs. But traders use other methods of finding trend lines as well.
In the DTL strategy, a major trendline is drawn along declining highs on a downtrend and rising lows on an uptrend. In the screenshot above, a downtrend line was drawn at two points, and then the price bounced off this line two more times.
The strategy got its name from the two trend lines (Double Trend Line), on which signals are received. The main trend line is called “Master” (MTL) and the corrective trend line is called “Trigger” (TTL).
The main idea of the system is to break the corrective trend line in the direction of the main trend line. Let’s take a look at defining the entry point.
After the trend line has been determined for two downward highs, we are waiting for corrective movements. As soon as a rising low appears, draw a trigger line to MTL. At the breakout point of this line, buy a Put option.
In the “DTL Strategy” system, it is allowed to use a moving average with a period of 200 as a “Master” line. It is much easier to set it on a chart than to look for points for drawing trend lines. The MA 200 line also signals a change in the main trend, that is, it can serve as an additional signal filter. If the price is above this line, look for points to buy Call options. If it is lower, then we buy Put options.
On the chart, the price moves below the MA 200 line . After the downward top has formed, draw the “Master” trend line, then find the points for drawing the Trigger line. At 08.30 the price breaks down the Trigger line. Buy a Put option at 1.1792 with an expiration date of 15 minutes, that is, after three candles. At 08.45 the option closes with a profit.
Trading rules are universal for almost any trading instrument and timeframe. The only thing, if large enough expiration timeframes typically one spark to trade within the day may take more than a long sequence of candles.
For example, having determined the entry point on the M5 or M15 chart, you should choose an expiration time of 3-4 candles. Moreover, the more active the market is, the faster the price will reach its intended target. For M1, the expiration time should be about 5 candles. Expansion of 1-2 candles should be chosen when trading on fairly large time frames – from H1 and higher.
Examples of deals
To begin with, we set a simple moving average on the chart . The 200th MA will help us in determining the direction for setting up TTL lines. In this case, the line is directed upwards, which means that we will open only Call options.
Our task is to draw a trend line along them when two or more rising lows are formed. Then, when this line is broken, we enter the trade. The confirmation of the breakout is the closing of the candle behind the line.
We open the Call option, the expiration time is 15 minutes or 3 candles on the chart. The option closed in ITM.
As long as the trend exists, we can carry out an unlimited number of such trades, defining the resistance line at each correction. On the breakout, open the Call option and wait for expiration. The option closed in ITM.
It is worth paying attention to the nature of the breakout candle. In this case, these are candles with a considerable lower shadow, which indicates a high probability of a rebound. On the contrary, it is better not to enter a trade if the candlestick is too large or has a high upper shadow. In this case, the option closed in the ITM.
Draw a trend line at two local maximums. Here the line has already been broken, so we open the Call option with an expiration of 15 minutes. Unfortunately, the option fell slightly short of profit and closed in ATM.
The DTL strategy is applicable for any financial instruments and different timeframes, since trend and corrective movements are typical for almost all instruments. The expiration time of the option should be selected according to the analyzed timeframe in the range from one to five candles on the chart. If all the rules are followed, the potential of this strategy is very high.