There are probably hundreds of Forex strategies out there and you are most likely thinking that another strategy would be a waste of time and effort. As a trading strategy it is exceedingly effective and profitable when the conditions are favorable, is quite straightforward in its methodology, and there are many individuals, past and present, famous or obscure, who have used this strategy to success and riches. We should note that the technical aspect of trend following is in fact quite simple, but also that it requires, before everything else, discipline, sound money management, and patience from the trader.
There may be hundred but Binary Options stand out. The key idea here is showing and following the right direction and this generates more right results than wrong ones because it is adapted from Binary trading. Besides going long, you can always choose Call option rather than selling currency pair and other assets, we choose Put. The next thing we need to solve is expiration time but this would be easier to manage. Now what is this strategy all about?
Necessary Indicators for Strategy
Below are the indicators of use for Trend Strategy:
- 4 period EMA (Exponential Moving Average)
- 10 period EMA (Exponential Moving Average)
- ADX (Average Directional Movement Index) 28
- MACD with settings 5, 10, 4
Any platform with these indicators can be used since none of these are traditional indicators for MT4.
Rules of Trading
Here are the rules for Call and Put:
- Call when:
- 1. The Green (+D1) ADX line needs to be above Red (-D1_ ADX line
- 2. EMA4 has to cross above the EMA10
- 3. MACD needs to be above zero
- Put When:
- 1. The Green (-D1) ADX line needs to be above Red (+D1_ ADX line
- 2. EMA4 has to cross below the EMA10
- 3. MACD needs to be below zero
Take note that these 3 conditions are done almost together and price quickly begins to go southward. From the original strategy however, no clear signal was noted concerning which signal indicates final confirmation. There was also no indication if conditions need to meet all at once. Nonetheless, based on my observations, if signals will be together in a shorter period, their would be a higher probably on winning. Here is example of put trade:
- There are some great signals that you can see by using this strategy even after placing indicators on the char and then testing it.
- The ADM index is probably is the major strength. It has a setting that that allows lesser market noise influence.
- When Red line is on top of the green line, Puts are most likely becoming profitable because bears are controlling the situation.
- The average of moving is naturally a lag. This is why it is a bit reliable.
- This also goes true with MACD which is also average based.
- If you take a closer look settings for MACD are close to those that are used for EMA and this then translates to more or less the same signals from those 2 indicators. This means that when two EMAs cross each other, MACD shall most probably cross on the zero level’s other side.
- MACD and two EMAs do give similar signals then why do we need them? That is a big wonder making it uncool.
Trend Binary Options Strategy
Getting rid of either EMA or MACD should be the primary matter to be considered. This is because they offer similar signals. It is your choice as to which among them you ought to delete. In my opinion I would most likely keep MACD because it is more useful than 2 EMA. The next thing you can do is figuring out when it expires. This is the tricky part but you need a single important thing which is using a longer expiration time than the time frame in the chart. This can be used to identify entries. For example if you look at a five minute chart your options must have an expiry time of 15 minutes the least because probably the succeeding candle once the a signal goes against your trade. However, if you have 3 candles, the trade needs to have more time in your direction.
The Bottom line
In conclusion, using the On Trend strategy is quite safe since it uses great tools. Moreover, if you are still a novice it will be hard for you to get the difference with poor and a good signal. This is due to the fact that ADX as an indicator is not that easy use. Using this strategy, there are more profitable signals than bad signals.
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