In the majority of cases, binary options trading are focused on the short term due to expiration period of the instruments. Most traders tend to shy away from trading options with longer expiry periods as it is hard to predict how the market will move during those times.
To tackle this problem what traders can do is to trade the market using daily charts much like what forex traders have been doing for years. Basically, the strategy requires traders to indentify a primary trend and then use Retracement and Stochastic crosses to provide the entry and continuation signals.
How The Strategy Works
As mentioned before, this trading strategy requires a primary trend be identified first. Once that is done, traders can use technical analysis tools like Moving Averages, Support & Resistance Levels or Trend Lines to confirm the trend.
The use of multiple indicators to look for continuation signals is recommended as the market will always experience pullback or bounces which can lead to a false picture. Once, the trend is confirmed, use price patterns and stochastic crossovers to look for entry signals. Due to the short term nature of binary options, go for trades with longer expiration periods like weekly or monthly to enough time for the trade to pan out.
Benefits of Trading with Daily Charts
Because this trading system relies on analysis from multiple indicators, the signals generated are normally very reliable. In comparison to 15 minutes charts or hourly charts, daily charts give a clearer picture of how a market is trending. For binary options traders, trading with daily charts also give traders the opportunities to use the “Double Up” feature of their trading platform if the trade is moving in the desired direction. In short, the potential for increasing your profit with multiple trades in the same underlying asset is there. In addition, binary options traders do not have to worry about problems like margin call or stopping out due to the simple risk profile of binary options. All traders have to do here is to wait for the right time to make a trade
Nevertheless, to use this trading system, you have to ensure that you have the patience to wait for the right signal to enter a trade. This is because the time frame traded is longer that what most binary options traders are accustomed too. It also implies that the number of possible trades that a trader can make is reduced tremendously.