Binary Fence Buying and Selling Strategy

Known also the “Double Profit” strategy, the binary fence trading strategy is a strategy which akin to allowing binary traders to hit a moving target. The strategy is popular among many binary traders for its cost effective and safe outcome which it promises to deliver to its users. The trading strategy also promises a higher payout than what most other strategies are capable of delivering to traders. Finally, the perfect implementation of this strategy will help to ensures losses are kept the absolute minimum.

Mechanics of the Binary Fence Strategy

tradingThe binary fence strategy is best employed when the market conditions are such that prices of the underlying asset are bouncing up and down within an acceptable range. the objective of the trading strategy is to allow traders to enter into market positions at both end s of the price range simultaneously which are as close as possible to the underlying asset’s highest and lowest price. With a gap which is wide enough, traders will be able to increase the probability of capturing profits for both trades made on opposite sides of the price range resulting in double the payout. A call position is entered at the point where the fence price level is the lowest while a put position is established for the highest price level of the fence. If both trades are placed at their optimal levels, traders will most likely end up with both their trades closing in the money when the underlying asset price expired between the upper and lower price levels.

Example of the Strategy in Action

For example, let’s assume that gold is currently trading at $1250 per troy ounce. The market is such that we predict gold prices will rise further up peaking at $1280 within the next hour. Based on our analysis, we also believe that the prices will come to rest below this peak level upon expiry of our options.

To implement the fence strategy, we need to enter into a call market position at a level at $1280 and a put position at a level which is between $1250 and $1280 (e.g. example, $1265). Once, gold prices have peaked at $1280, our call option will close in the money and if the price ended up at $1265 or below upon the expiry of our put option, we will also close in the money for our put market position.

Bollinger Bands

To help traders to identify the ideal price volatility and know the right time to enter into the with the fence strategy, they can rely on the use of Bollinger bands to help them measure the price volatility of the asset that they are interested in trading in.

With the bands positioned above and below the moving average line, traders can see a range of prices forming that will dynamically adjust itself according to volatility of the market and hence representing the ideal visual representation of current trading conditions.

Bollinger Bands; the Ideal Technical Indicator for the Fence Strategy

Bollinger Bands; the Ideal Technical Indicator for the Fence Strategy

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