Presented strategy is suitable for intermediate and advanced traders, since it requires some knowledge of price action to be able to produce consistent winning results. Once it is practiced and mastered, it can be turned into one of the strongest trading strategies for binary options.
Strategy it is built for currencies trading (Forex) and can be applied to any currency pair and any timeframe.
The analysis is done manually with aid of some indicators, but mainly uses Fibonacci extension and retracement levels and trendlines in combination with oscillators (such as Stochastic).
The main highlight of this strategy is that it can be used in any type of market and a trader can always find good trade entry positions.
Binary Options Strategy with Fibonacci, Trend Lines and Stochastic
This trading strategy offers a lot of flexibility and personalized approach, since each trader would use Fibonacci tool to measure different trends, but no matter which trend is measured the Fibonacci levels will always act as support and resistance levels.
Using the absolute Fibonacci support and resistance levels of 50, 127 and 161.8, measured with Fibonacci tool in combination with stochastic relative overbought (above 80) and oversold (below 20) zones will give a trader information about possible levels where short and long term reversals can be expected.
Medium or strong trading market is perfect for this type of trading, especially if Fibonacci extension levels are traded (127 and 161,8 or even 261,8). However if the market is in a range, any of Fibonacci retracement levels can be traded as well (23.6, 38.2, 50, 61.8 and 100; 50 retracement level being in most cases the most valid as the resistance level).
Additional confirmation can be done with trendlines and pullbacks are traded only when a candle crosses and closes above or below the trendline.
Entry is made in the direction against the market trend (reversal or pullback).
When trading on 1 minute or 5 minute charts, expiry time of 5 to 10 minutes is advised.
On the Fibonacci level 127 a reversal is usually shorter (5 minutes), but if the price breaks the level 161.8 a longer reversal can be expected and longer expiry time can be selected (10 minutes).
The trade should be placed only after the price breaks our traded Fibonacci level and the full candle closes above or below our traded level. If at the same time the price is crossing some of trend line support and resistance levels, this gives additional confirmation about possible reversal.
A bit of practice is required to recognize some price patterns to be able to find most profitable trades. However, as explained before, mastering this type of trading will allow the trader to trade in any market.