Range Bound Binary Options Strategy can take many forms. Detecting range bound can be done by several methods, like: 50SMA angle ,MACD histogram range, 34 EMA + 5 EMA,ATR & Standard Deviation,Following WellxAMA etc. Regardless of how complex the trading world can be, you can rely on several strategies that can help make your trading life easier. One such strategy is the Bound Trading for Binary Options. This can be best used for ranging market. But, primarily you need to know who to identify ranges. This are actually bound areas arranged in timely manner. When you learn how to identify sideways movement in the earliest time, then you will be ready to use the bound trading strategy.
Range Bound Binary Options Strategy
The first step in creating a range-bound trading strategy is to identify a currency pair that currently shows defined support and resistance lines. Optimal currency pairs are range-bound and slow-moving, allowing traders time to anticipate and react to support or resistance encroachments.
Generally speaking, buyers are stronger at the lower end of a range and sellers are stronger at the higher end. Traders can enter long just before the support price and place a stop just below, offering them the ability to exit before a breakout occurs against them. The opposite works for entering short just prior to the resistance boundary.
By simply adding 2 levels – upper and lower horizontal lines above and below 0 on MACD, you’ll mark areas most vulnerable to market consolidations.
How Range Bound Strategy works
It may not be a very complete strategy; you can still use it effectively. You can start here in order to use it with binary options trading. The strategy’s author proposes that you apply MACD indicator which puts a histogram on your trading asset’s chart. This indicator can put two more levels wherein the first is 0.0005 and the other is -0.0005. Its settings are different since it depends on the number of decimals that your broker uses. Thereby, you may have to make adjustments to more or fewer zeros. Based on this idea, a single price trades between two lines. This already means that you are in range or bound market.
The way we’ll be able to see it after it was formed (useful for trading breakouts afterwards). BUT, inside that green area I’ve highlighted zones of MACD histogram trading in between 0.005 and -0.005 values – this is when we will actually be able to detect a ranging market as we trade in real time.
When MACD histogram go to the area between those two levels, there is a ranging period which starts and then the prices moves closer to sideways. However, don’t put in mind that such levels are some sort of awesome cage that will imprison the price forever. It’s just so simple that the histogram may go in the zone and then exit thereafter. This is why it is ideal to have a little patience in waiting in order to witness how these prices behave when the histogram enters the right zone or make use of additional indicators that tip-off about probably range or bound market.
How Range Bound Binary Options Strategy works
Suppose that you have successfully recognized a market that is range bound. The next ideal thing that you ought to is to purchase boundary options with IN as a clear choice. However, this greatly depends on the strike prices that are offered by the broker for such option. Another way to do this, where you will need to have some support and resistance knowledge, is to draw support and resistance levels that correspond to buying calls when price taps support and Puts when prices taps resistance and when it also corresponds to the ranging period. This will work if you will trade after support and resistance levels and you will identify this properly.
Another way of trading is when histogram exits the range zone clearly you can then trade its breakout. This means that you purchase a Put when the histogram breaks the level -0.0005 and then purchase a Call when the histograms break 0.0005 levels. This must come with a matching support and resistance level break which you have drawn already.
Advantages of Range Bound Binary Options Strategy
- Yes, its histogram will go in the 0.0005 to -0.0005 zone quite often but it will not actually be there most of the time.
- Even when prices are not trending but just moves enough to surpass level, your skills will not be changed by drawing two lines.
- Moreover, varied assets come with their specific and preferred levels and this will be enough for all asset types and pairs.
- As a matter of fact, the creator suggests that you must change levels and then adjust them to the pair or pairs that you are trading.
- You really need to have trader skills when using this.
Disadvantages of Range Bound Binary Options Strategy
- It may be hard to identify range bound markets the moment it starts.
- Even amateur traders find it difficult.
- This strategy may not be full proof without any holes but it can surely offer you great details in probably starting points of ranging periods.
- Additionally, it provides you to trade in a number of ways with the use of Normal calls and normal puts and of course Binary Options.
- It also offers probable breakouts when the histogram leaves its range zone.
The bottom line
The trader may repeat the process of buying at support and selling at resistance many times until the stock breaks out of the channel. The upper boundary of the channel is shown by a trendline that connects the points representing a stock’s highs over a given time period. The lower boundary of the channel is identified by connecting the points representing a stock’s lows. This will surely be a helping hand even when you it does not seem so sure of market identification that moves sideways through MACD histogram. Histogram may move outside its levels a lot of times during trading session. However, when you will see it sticking in the zone longer, you can then begin to look for some hints that show a market that is range bound.
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