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Saturday, 25 February 2012

Inside Day Binary Options Trading Strategy

The inside day binary options strategy aims to catch a price reversal before the market wakes up to that reality. The basis

of this strategy is the inside day candle formation, which is a two-candle formation featuring a longer candle and a shorter

candle contained within the day 1 candle. In essence, the high of the second candle is lower than the high of the Ist candle,

and the low of the 2nd candle (day 2 candle) is higher than the low of the day 1 candle.

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INDICATORS:
In order to apply this strategy to the binary options markets, the trader must first use some indicators with this candle

formation on the MT4 charts, then apply the generated signals to the binary options markets. The indicators to be used are as

follows:
Stochastics Oscillator
Bollinger bands

THE STRATEGY:
When the stochastics is showing an overbought signal i.e the lines of the stochastic cross at 75 and at the same time, the

inside day candle formation occurs at the upper bollinger band, then this is considered a signal that the price of the asset

will fall.
If the stochastics oscillator shows an oversold signal i.e the lines of the stochastic cross at 25 and at the same time, the

inside day candle formation occurs at the lower bollinger band, then this considered a signal that the price of the asset

will rise.
ENTRY RULES:
Now that we know what to look out for on the MT4 charts with regards to the signals generated by the indicators and the

inside day candle formation, we can now go over to the binary options platform and make a selection of what kind of contracts

we can trade.

The binary options trade contracts of choice are:
Rise/Fall (also called High/Low, Call/Put or Up/Down depending on the binary options broker of your choice...

TOUCH/NO TOUCH
If the asset is range trading when this occurs, then the trader can also add In/Out or Boundary trade contract to the mix


USING THE INSIDE DAY STRATEGY TO TRADE BINARY OPTIONS:
The inside day binary options strategy can be used to trade the Call/Put options, in which case, the following scenarios can

be traded

First Step:
If the inside day candle forms at the lower bollinger band at the same time that the stochastics oscillator shows that the

market is oversold, the asset will most likely be headed upwards. The following trades can be taken:
The trade should trade a "Call" option, using an expiry of at least 48 hours. The strike price ids the market price at the

time of trade entry.

Th trader can also trade the No touch option, using a strike price that is about 50 pips lower than the market price as the

strike target using a 48-72 hour expiry period.

Using the same scenario, you can trade a touch option contract, using any strike price within a range of prices starting from

the price at the middle bollinger band to the market price..

An expiry of at least 4 days should be used, because if the price action touches the strike price even once within that

period, there, you make a profit...



Second setup:
If the inside day candle forms at the upper bollinger band at the same time that the stochastic oscillator shows that the

market is overbought, the asset will most likely be headed downwards... The following trades can be taken:

A No-touch trade option, using a strike price that is 30-50 pips higher than the market price set as the strike price. Expiry

should be set to 48-72 days...

A touch option trade, using a target between the upper and the middle bollinger bands. Expiry should be set to at least 4-5

days...

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