Divergence Binary Options Strategy

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9# Binary options divergence strategy with bollinger bands

Binary options strategy one touch Divergence with bollinger bands

Submit by Joy 22 18/06/2020

Divergence Method of the trading.

What ‘s divergence?

In an up trend that will setup as a bearish trade, you ‘ll see the price making higher highs but you’ll see the indicator making lower high.

In opposite direction?

In an up down taht will setup as a bullish trade, you ‘ll see the price making lower lows but you’ll see the indicator making higher low.

Time Frame 5 min= Time expire 60 min.

Time Frame 15 min= Time expire 180 min.

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ATM RSI Histo Triple Stochastic Divergence indicator;

Fibonacci Retracement: XIT Fib indicator.

The price should be above the upper Bollinger Bands indicator in case of a bearish divergence and in the same manner the price should be below the lower Bollinger Bands indicator in case of a bullish divergence.

When the bullish divergence is spotted (time frame 5 min), it is a signal for buying a 1 hour call option.

Buy When the red bars of the indicator ATM RSI Histo Triple Stochastih Divergence retrace below the dottet black line.

Touch points are the Fibonacci Retracement: XIT Fib indicator.

In the same manner when a bearish divergence is spotted (time frame 5 min), it is a signal for buying a put option.

Sell When the blue bars of the indicator ATM RSI Histo Triple Stochastic Divergence retrace below the dottet black line.

Touch points are the Fibonacci Retracement: XIT Fib indicator.

This method of trading based on divergence can also be applied to Binary otions strategies High / Low but this method of trading is not for beginners.

Share your opinion, can help everyone to understand the forex strategy.

schrempfy (Monday, 26 October 2020 15:39)

is there an addon to get an alert, when the retracement is taking place? I cannot look at the chart the whole day. please help/any advice! ? Thanks!

Ismail (Tuesday, 22 September 2020 21:18)

Hello joy22,
How are you doing?
It is very difficult for me to understand to identify the divergence, specifically the sentence “retrace below the dotted black line” can you please help me understand better, awaiting for your reply,
My email: [email protected]

alexit69 (Thursday, 14 May 2020 18:14)

Yes , Ken , you are missing something : this is not an expert advisor for forex but a a strategy for binary option with a template (tpl) .

Ken (Sunday, 29 September 2020 18:10)

I would like to test this ea, but when I download and unzip, i’m only getting a .tpl file, i’m i missing something?

EMA / CCI-divergence – Binary Options Strategy

Presented for binary options strategy uses two indicators. The first is the exponential moving average (EMA), and the other is the CCI (Commodity Channel Index). EMA serves us to determine the trend, and CCI in its unusual form, giving signals at the time the divergence between its indications, and keeping the price of a financial instrument. Analysis make the 15 minutes charts, and the expiry time for the strategy is in the range of from 15 to 30 minutes, so it should be suitable for traders who prefer low intervals.

[pullquote align=”full” cite=”” link=”” color=”” size=””] The described strategy you can try out the account with a broker – Option Trade, which is recommended by the portal Comparic.com. [/pullquote]

Prepare chart

What will we need?

  • 15-minutes chart (M15) selected currency pair
  • Exponential Moving Average of 200 periods (EMA 200)
  • CCI_Divergence indicator available for download by clicking the LINK

Adding exponential moving average is really a simple procedure for the MT4 platform, which is shown in the screenshot below:

The second indicator of what we will need is CCI_Divergence. It is not by default built into the platform, it must therefore be downloaded from this LINK and put in a folder Indicators, which is located in the MQL4 our platform. Finding this folder enables the “Open Data Folder” shown in the picture below:

Once this is done, restart the platform and apply the indicator on the chart. As in the case of the EMA, here too, first click Insert -> Indicators -> Custom -> CCI_Divergence. We leave the setting unchanged and they should look like this:

Our chart should now look like the one below:

Determining the direction of the trend

The strategy assumes moving with the trend, so the first step is to precisely determine the current sentiment. For this purpose, we use the Exponential Moving Average of the two hundred periods (EMA 200). So if:

  • the price is below the EMA 200 we have a downtrend,
  • the price is above the 200 EMA we have an uptrend,
  • Exponential Moving Average intersects the price, this means that there’s a consolidation (at that time didn’t speculate).

Waiting for a signal

After determining the trend (or lack thereof in the case of consolidation) we look at CCI_Divergence indicator, which is visible in the window at the bottom of the chart. The blue line is the indicator is CCI, while green and red lines show the divergence between the indications of the CCI, and the behavior of prices. Visible are also the arrows in the same colors, followed by the signal for the transaction CALL or PUT. After drawing arrows should also experience an audio alert on the MT4 platform and a message on the screen.

Action strategies for binary options

When CALL, when PUT?

We already know how to determine the trend, and we know the operation of the indicator CCI_Divergence. We can then go to the heart of the strategy, namely the choice of the appropriate binary option for us.

Foundations for the CALL option:

  • the price is above the average of the EMA 200 (uptrend),
  • CCI_Divergence indicator informed us of the occurrence of a bullish divergence (green arrow indicator and the message on the screen, both visual and audible).

Foundations for the PUT option:

  • the price is below the average of the EMA 200 (uptrend),
  • CCI_Divergence indicator informed us of the occurrence of a bearish divergence (red arrow indicator and the message on the screen, both visual and audible).

Guidelines strategy are very simple and shouldn’t cause any problems even experienced traders. Note, however, that in the case of CALL option only react to the bullish divergence (green arrow indicator CCI_Divergence) and for PUT only bearish divergence (red arrow).

How to do it?

CALL option

We have all the elements of our uncomplicated strategy. Let’s get to show step-by-step analysis of how it should look and the same transaction. The following example will be shown for the uptrend and binary option CALL:

In the above chart clearly shows the uptrend (the price moves above the exponential average of 200 periods) and therefore we focus only on the signals CCI_Divergence indicator that inform us about the bullish divergence (green arrows in the indicator’s window). Immediately after the signal open call options with expiration date after 15 or 30 minutes.

PUT option

Now we’ll signals for the PUT option. Immediately we will chart with examples.

As described in the chart, the price is in a downtrend due to its presence at the EMA 200. For this reason we omit any signals informing us about the bullish divergence (green arrows) and accept only those that tell us about the bearish divergence – red arrows on the indicator CCI.

MACD Binary Options Strategy

MACD Binary Option Strategies makes use of one of the most effective trading indicators out there.

The Moving Average Convergence Divergence (MACD) is an indicator that incorporates trends and momentum.

The MACD has been proven its worth in the Forex and stock markets for a number of years and has been the staple tool for any technical analyst.

Yet the question remains, how effective is it when trading binary options?

We will take a look over some of the most effective MACD Binary Option Strategies.

What is the MACD Indicator?

The MACD was first developed in the 1970s by a man named Gerald Appel. It is a lagging indicator that is used to follow trends. The MACD consists of two exponential moving averages and a histogram. The MACD is calculated as the difference in the assets 26 day (slow) and 12 day (fast) Exponential moving averages (EMA). These indicators will use the closing price of the asset in their calculation.

Apart from the standard MACD indicator, there is also a 9 day EMA of the MACD that is plotted as well. This helps for the trader to decide whether they should be buying / selling. The general rule of thumb when it comes to the MACD indictor is that it is a bullish indicator when the MACD is above its 9 day moving average.

There is another indicator that is added to the MACD representation and that is the histogram. It is helpful as it is able to identify when the difference between the moving average and the MACD itself is positive / negative. It is easy to tell when looking at the histogram whether there is a bullish indicator or bearish indicator.

Interpretation of the MACD

The name says everything, the MACD is all about spotting periods when trends are either converging or diverging. Converging is when the price is going in the same direction of the underlying trends. Diverging is when the price is going in the opposite direction.

When looking at the MACD, when the short term EMA is above the long term indicator this is considered a divergence. It is a convergence when they are moving together.

Given that the MACD line is an oscillator, when the MACD line is above zero, this means that the short term EMA is moving away from the long term MA in a positive direction and this should be a bullish sign.

Similarly, when the MACD is below zero it means that the short term EMA is diverging away from the long term EMA but on the downside. This is a bearish indicator.

When the Signal line and MACD histogram are included, the binary options trader is able to get a lot more colour and is able to determine whether the MACD indicator itself is converging or diverging.

For example, if the MACD histogram is positive it means that the 9 period moving average of the MACD is above the MACD and could mean the MACD is still heading in a positive direction. The opposite can be said for a Moving Average that is below the MACD.

Taking a look at an example, in the image to the right, we have the EURCHF currency pair with the MACD lines plotted below. We have also plotted the price charts using candlestick indicators and moving averages above which are for indicative purposes. AS you can see, the MACD is calculated as the difference between the two moving average lines in the main price chart.

Looking more specifically at the indicator chart, the light blue line is the MACD indicator, the red line is the moving average of the MACD and the histogram is the difference between the two. In the cases when the MACD was positive and the Moving average of the MACD was increasing, this was a bullish sign for the trader.

Binary Option MACD Strategies

MACDs are a great indicator to use when trading binary options as they help to identify when momentum is strong and when it is tapering off.

When the trader sets the MACD periods to the option expiry periods, an even more accurate reading is presented. It will help the trader assess whether they should indeed enter the option up or down.

The MACD indicators can also be used when the trader wants to employ more exotic binary options such as one touch and no touch options.

Below we will run through some examples of binary option trades that you can embark on once reading the MACD indicator.

MACD 0 Line Crossover

A 0 line crossover, or “center line” crossover occurs when the MACD line goes from positive to negative. This is an indication that the asset may be moving from a situation of positive momentum to negative momentum and vice versa.

When the MACD crosses from negative to positive then this is seen as a bullish sign and is called a bullish crossover. On the other end, when the MACD crosses from positive to negative this can be a bearish indicator and is called a bearish crossover.

Indeed, a 0 line crossover may not be an indication that momentum has switched. For example, there may be a situation where the MACD will remain close to the 0 line for some time going forward. These are indeed hard to read and just show that momentum is currently quite limited.

Taking a look at an example of a binary options MACD crossover trade, below we have the price of Ether (USD) with the time period set to five minute candles. This was a Bullish crossover and was an indication that there was a move to positive momentum in the price of Ether.

In this case, the trader should consider entering a 5 minute binary option CALL on the price of Ether. As we can see, the next candle ended up closing considerably up from its open. This means that the CALL option would have ended up in the money and paid the trader off.

MACD Signal Crossovers

As mentioned above, the MACD signal line is very helpful as it allows the trader to spot when the MACD indicator may itself turn. This could then be a prelude increasing / decreasing momentum in the assets price as the MACD itself may turn.

In general, when the MACD line goes over and crosses the signal line, this is a bullish (positive). On the other side, when the MACD crosses the signal line to the downside then this is considered a bearish crossover and shows that momentum could be turning the other way.

If the trader was using a simple high / low binary option strategy, they would look to enter a PUT option in the case of a Bearish Crossover and they would enter a CALL option for a Bullish crossover.

In the below chart, we have the price of Gold with Candlesticks placed on a 2 minute horizon. Hence, the trader should consider 2 minute binary option trades as the instrument.

As you can see, there was a signal crossover and this was a Bullish crossover as the MACD has passed over the signal line. We can also see that the Histogram has reversed and is now positive.

As this is a bullish signal with momentum reversing to the upside, the trader should place a 2 minute binary CALL option on the price of gold. Indeed, the trade would have expired in the money as the closing price of the candle was above the opening price.

Although trading binary options with the MACD can indeed be profitable, the trader needs to be careful placing trades when the MACD line is at all-time highs or lows.

MACD Momentum Divergence

A MACD divergence occurs when the movement of the price is different from that which is being demonstrated by the MACD indicator itself. This is usually a sign that the momentum is indeed tapering out and should make traders weary. As we have mentioned, momentum is a key ingredient in a trend continuing its trajectory.

Hence, if the binary options trader is to observe a divergence between the MACD and the underlying price then this is an indicator that they should consider placing a trade that is contrary to the trend. A reversal from the current trend in the price is indeed possible.

There are two types of MACD divergences. There is the Bullish divergence which occurs when the price of the asset continues reaching lower lows but the MACD indicator itself records a higher low. A bearish MACD divergence occurs when the price of the security reaches a higher high but the MACD indicator is recording a lower high.

Taking a look at a MACD convergence example, on the right we have the 10 minute chart of the S&P 500 index as well as the MACD indicator below. As you can see, the index is reaching higher highs but the MACD seems to be reaching lower highs. This is an indication that some of the momentum behind the price move is indeed eking out.

The trader should therefore consider entering a 10 minute Binary PUT option on the S&P 500. Of course, it is quite difficult to ascertain when this should exactly be done as we can see that the price kept on climbing even though the MACD was falling. At this stage, it should be an indication to avoid a CALL option trade at this point.

However, there appeared to be a Bearish MACD signal line crossover. In this case it appears to be occurring at the same time that we are having a bearish divergence. At this stage, the trader should place a 10 minute Binary PUT option in expectation of a fall in the price.

Indeed, if the trader had done this, the option would have expired in the money as the candle closed down below the open. The trade would have ended profitably and paid the trader out.

Other Considerations

These MACD strategies have worked effectively for a number of years and are borrowed from traditional forex and stock trading. However, even if you think that you have a perfect opportunity to enter a trade, you have to take into account other technical factors which could also have an impact on the price at that point in time.

It is also advisable not to embark on a strategy like this if you don’t have an understanding of the basics of binary options. Similarly, when using a binary options trading strategy, you need to also make use of a money management strategy. This is because profitability is impacted by more factors than just what trade is placed.

The trader will need to be measured in the amount that they would like to stake on each trade as well as know when to stop trading if the MACD binary option strategy is going contrary to expectations. Using a combination of different trading disciplines is a surefire way to trading binary options profitably.

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