The good old, almost always reliable, moving average comes to help us even when investing in binary options, as long as we know how to find the right time frame and the right periods to base our moving average. The basic rules of the moving average are the following:
If you believe that trading is reserved for mathematicians or great statesmen, you are mistaken; in fact, you can get very interesting profits merely by following the moving average method. In binary options, results can be even more effective when you use a strategy combined with other financial instruments. Of course, the moving average must be calibrated based on the expiry of the binary option and not all of the deadlines work equally well:
For our strategy we will use binary options with expiration times from 5 to 15 minutes on M5 charts and 14 periods Moving Avarage.
STRATEGY WITH MOVING AVERAGE
We will proceed to describe our strategy, but first let us recall that no strategy is infallible and all the strategies also give false signals. False signals are inevitable, but the outcome can be corrected with careful management of the capital: It is recommended that you do not risk more than 5% of your capital for each operation. If you want to, you can even risk 10%, but in this case, the probability in favor decreases exponentially.
To implement this strategy we need an extremely volatile asset; therefore, our investments will focus on the currency pair EUR/USD. As first we set the time frame of our graph to M5, each candle will have a session of 5 minutes.Then we set up our simple moving average to 5-minute periods. What we will see will be something like this:
The signals on which to operate are the following:
• When a candle opens under the moving average, buy a PUT option.
• When a candle opens above the moving average, buy a CALL option.
As you can clearly see from the figure, the strategy yields excellent results, with a good deal of revenue and only a few false signals.