Trend Strength Strategy for Binary Options

The Trend Strength trading strategy for the binary options market utilizes the 5SMA TrendStrength.ex4 indicator to identify trade opportunities for the binary options market. It does this by using colour changes to its bar components to define market bias.

Chart Setup

MetaTrader4 Indicators: 5SMA TrendStrength.ex4 (default setting), Line tool (default setting)

Preferred Time Frame(s):  Any

Recommended Trading Sessions: Any time the signal appears

Assets Traded: any

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Trade Example

TrendStrength-binary-options-strategy

Fig 1.0

STRATEGY

The strategy is to look for when the indicator bars are showing a certain colour. Price action must be in a defined trend, with the lows (uptrend) or highs (downtrend) being aligned in such a way that at least three of such areas can be connected with a trend line.

Once the trend line is drawn into the future, the trader waits for future candle formations to touch the trend line. If the colour of the 5SMA TrendStrength.ex4 indicator support the move, the trade is taken.

CALL Entry Rules:

A CALL entry is made when the following indicator pattern is displayed on the chart:

  • A trend line connects the lows within a defined short period of up-trending price action.
  • Once the price action returns to bounce on the trend line, initiate a CALL trade once this happens. See example below.

Expiry

The trade is set to expire at the closing price of the 2nd candle, which is the candle after the entry candle. We can see from the chart above that there were 2 CALL trade opportunities which would have ended in profit had they been taken.

Exit Strategy

It is possible to exit the trade before the trade’s expiry time by closing the trade manually using the Early Closure function on your broker’s platform. However, this will come with a reduced payout and can only be performed on a chart that is a minimum of 1 hour.

PUT Entry Rules:

A PUT entry is made when the following indicator pattern is displayed on the chart:

  • A trend line connects the highs of price candles within a defined short period of down-trending price action.
  • Once the price action returns to the trend line, initiate a PUT trade once this happens. See example below.

Expiry

The trade is set to expire at the closing price of the 2nd candle, which is the candle after the entry candle. We can see from the chart above that there as a single PUT trade opportunity which played out as the described strategy.

Exit Strategy

It is possible to exit the trade before the trade’s expiry time by closing the trade manually using the Early Closure function on your broker’s platform. However, this will come with a reduced payout.

Here we see the indicator showing its different colours (fig 1.0): red for selling bias, yellow for neutral and green for buying bias. We see the CALL trade setup and the PUT trade setup. The trader must trace the trend lines in such a way that it cuts across three highs or lows. Due to the trending nature of prices, it is very likely that the trades will end in the money on conclusion.

Free Download

Download the Trend Strength Strategy for Binary Options

About The Trading Indicator

The Trend Strength indicator requires the trend line to produce its effect of detecting buying or selling bias in the market.

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