Fibonacci Fan Binary Options Strategy
The Fibonacci Fan binary options trading strategy is a strategy that utilizes the iFibonacci.ex4 indicator to detect conditions where price may rise or fall around the Fibonacci fans. This indicator is based on the Fibonacci numbers and can trace both Fibonacci retracement lines and fans. The fan lines will be used for this strategy.
MetaTrader4 Indicators: iFibonacci.ex4 (the colour settings of the retracement component of the indicator must be altered so it can merge with the chart, allowing visualization of just the fan component).
Preferred Time Frame(s): 5 minutes, 15 minutes
Recommended Trading Sessions: Any time the signal appears on the charts.
Buy CALL examples
The strategy is to trade the price action off the Fibonacci fan lines traced by the indicator. The fan lines are diagonal lines on which price action may bounce (Call) or be rejected (Put).
Call Entry Rules:
A Call trade setup occurs when the following occurs:
- Price action retraces to a Fibonacci fan line. The price candle must bounce off this line i.e. must touch any of the fan lines without closing below the line.
- Allow the next candle to open and pull back slightly to the fan line. Once it touches the fan line, open the CALL trade.
The expiry for this trade is 2 candles, which is equivalent to 30 minutes. Many platforms have expiry times of 30 minutes on their charts by default. It is also possible to close the trade manually when it is in profit for a reduced payout.
Put Entry Rules:
A PUT entry setup occurs when the following setup is seen on the charts:
- Price is rejected at the fan line which is downward sloping.
- Allow the next candle open and pull back to the fan line, then open the PUT trade immediately it touches the fan line.
The trade should last only 2 candles, which is equivalent to 30 minutes. It is also possible to opt for the early closure when the trade is in profit. This however produces a lower payout.
About The Trading Indicator
The iFibonacci.ex4 indicator is an excellent indicator for trading binary options. This is because it traces both fans and retracement lines.
For this strategy, the angulation of the fan lines ensures that even when the expiry candle ends at its open price, this is either higher or lower than the entry price and so usually produces a high rate of success.
The only precaution that traders should take is to ensure that the signal candle (which precedes the entry candle) does not close above (Put entry) or below (Call entry) the fan line. This provides the perfect setup for entry.