Fibonacci levels in Binary Options

Hello, friends!

The golden ratio is a natural proportion that is reflected throughout the world around us. The ratio of numbers in the Fibonacci sequence is also approaching the golden ratio, which makes it possible to use the Fibonacci lines in binary options trading as relative support and resistance levels , as well as to determine the correct proportions of chart patterns and the moments of completion of corrective movements.

Today we will learn what Fibonacci levels are , and how to use them to develop your own strategy for making money in the Binary Options market.

Fibonacci sequence

Each next number in the Fibonacci sequence is the sum of the two previous ones: 1, 1, 2, 3, 5, 8, 13, 21 … Moreover, if you divide any number of the sequence by the one in front of it, then their ratio will approach the golden number 1.618 ( the number of the golden ratio).

In financial markets, the sequence is most often used in the form of Fibonacci lines (or grid). By default, the Fibonacci grid consists of many levels, but only two main ones are important for you.To begin with, try to imagine the golden ratio as a segment divided into two parts, where the first part equals 62% of the total length, and the second part equals the remaining 38%. The ratio of the lengths of the two parts corresponds to the value of the golden ratio. Next, we will find out how to use this relationship in trading.

Trading strategy

We will trade only along the trend . Fibonacci levels will help us in determining the completion of corrections. We will trade on the minute TF. Minutes are good for both training and constant trading. For those who do not keep pace with the market, it is better to switch to M5 — the essence of the strategy will not change from this, and the quality of signals will even become better.

So, first you need to determine the general direction of the trend. In this case, the direction is upward. Next, we visually define the previous wave movement.

Select the Fibonacci Line tool and draw from the low to the high of the movement. If the movement was downward, you need to mark the grid starting from the maximum to the minimum. The 61.8% level should be slightly below the middle of the previous wave — this is the level we will trade, since the probability of price rebound from this level is the highest.

The essence of trading is simple — when you touch the 61.8% retracement level, open an option in the direction of the current trend movement. The expiration time is 10 minutes. For periods above M1 , the expiration time should be 5 candles.

In summary, the trading mechanism is as follows:

• Determine the direction of the general trend;
• We mark the Fibonacci grid relative to the previous wave;
• When the price touches the 61.8% level, we enter in the direction of the trend.

Examples of deals

EURUSD, minute timeframe . Despite the rather small period, even here the Fibonacci levels work out quite well. In this case, the price bounced exactly from the 61.8% level.

However, you should be careful not to trade on small periods during periods of weak market activity. When the movement is sluggish and the price constantly tends to go into the channel, it is very difficult to predict the right expiration time. If you nevertheless decide to trade on a calm market , the usual expiration time can be increased by 2-3 times without hesitation. That is, if the usual expiration time is 10 minutes, then in a calm market the price should be left about half an hour of time to bounce off the level.

Do not forget, if, in the case of a downtrend, the grid needs to be stretched from top to bottom, then on an uptrend, on the contrary, from the bottom point to the top. Further, everything is exactly the same, when the price touches the 61.8% level, open the Call option with an expiration of 10 minutes.

Conclusion

If you do not have any experience of using Fibonacci levels in trading, first practice the markup on the historical chart. Having understood the basic principle, then you need to train the skill of marking on a «live» chart . This is a very important stage before switching to a real account . The fact is that Binary Options is a very simple tool, and the absence of complications relaxes and the trader often loses vigilance. I advise you to first master the tool well, which will subsequently turn the invested effort into income.