The maximum profit is given by trading on the trend, no one will argue with this. But if you look at the history of how signals work for binary options, you can see that 70% of the time market in sideways range. Flat indicators will help you accurately identify periods of low volatility, enter at the very beginning of directional movement.
All trading assets have periods when the price is almost unchanged, which means a lack of liquidity or a temporary "truce" between buyers and sellers. Moreover, the flat can be wide with sharp speculative movements of 50-100 points, which are not confirmed by trading volumes. Sideways movement begins when the trend has ended, before or after strong fundamental events.
The flat indicator makes it possible to prepare in advance for opening a trade after a range breakout, when the trend begins to lose its strength or close the current position. When analyzing price dynamics, you should remember:
- If there is sideways movement on middle and higher timeframes, look at shorter time periods. There may be areas of the trend where it is quite possible to open an intraday trade.
- Exact binary option strategy should detect the presence a sideways movement with the same accuracy regardless of the timeframe and currency pair;
- Good when the flat indicator has settings for the average volatility. For example, pairs that include GBP, the norm is the width of the corridor of 50-70 points, and for the low volatility NZD, such movements are already a strong trend.
Standard flat detection tools
Our task is to determine the absence of pronounced movement. It is logical to assume that first this will be shown by the flat indicator following the market direction – moving averages (Moving Average) and their combinations. One of the simplest options present in all binary trading platforms is Bill Williams «Alligator».
The lines are intertwined or arranged in parallel- flat; begin to divergence at the beginning of new a trend.
The next flat indicator is Bollinger Bands, where, in addition to the direction, current volatility is assessed. The narrower the channel, the stronger the next trend will be, and with 50-60 points of width, use swing binary options strategy, especially on higher timeframes.
By the nature of the price movement relative to the indicator lines, one can estimate current strength of bulls or bears. The longer the chart «spreads» along the Bollinger border, the more the trend weakens.
The boundaries of the price corridor will be strong resistance/support levels, open trades inside it using the Keltner Channel indicator as another version of «envelope of averages»:
Open binary options only when rebound from the Keltner Channel border!
Parabolic SAR can be used as flat indicator, which also uses Moving Averages with more convenient indication. The basic principle remains - the closer the signal points are to each other, the faster the start of the price impulse with the breakout of horizontal range.
On lower timeframes, Parabolic SAR can lag strongly, showing the beginning of trend when it almost over. It is recommended to use it only an element of comprehensive strategy for binary options.
The oscillator as a flat indicator shows only the general trend without information about the direction in which the range will be broken. Among the disadvantages – finding the moment of exit from the sideways movement is delayed, however, as is the entire technical analysis.
They are usually used to confirm trend indicators. When there is flat, the signal lines do not go beyond the middle line between the overbought and oversold zones. If they are near the average or zero level in the near future, the market will continue to «sleep». Stochastic Oscillator, Relative Strength Index (RSI), Williams% R and their modifications have proven themselves well:
Even on the minute timeframe, Stochastic and RSI rarely goes into the extreme zones, and you can miss a lot of good top binary options signals. If price and oscillators start moving in one direction − you can open an option!
As gain experience, move on to professional tools, such as the Accelerator Oscillator (AC) or ADX, which reduces delay due to a complex algorithm, improving trading binary signals.
The trading volume as indicator of flat
The trader usually sees only the number of transactions per unit of time or the tick volume, despite this, it will be the third confirming factor. Standard Volumes, On Balance Volumes, or Awesome Oscillator should show small volumes - if the market is outwardly calm, but activity does not decrease, then a new trend is already close.
During the publication of important fundamental news and statistics, we do not open options 30 minutes before the news and 30 minutes after the publication; cautious traders can close current deals. To control the events, we use the economic calendar included in the all popular binary trading sites!
Now let's see how all three instruments confirm each other's signals:
As you can, the entry point is quite reliable, even beginners of binary option trader can find it
Flat indicators in TradingView
Binary signals software vfxAlert contains the price charts of the TradingView service and a set of technical indicators, among which there are also tools for determining the flat:
The indicator consists of two lines showing the direction and strength of the trend. By default, the uptrend (VI+) line is blue, for downtrend (VI-) it is purple. The line at the top shows which trend is currently on the market. The beginning of the flat will be the intertwining of lines as in "Alligator" followed by a horizontal movement.
Bollinger Bands are used: the presence of a flat is determined by the frequency of crossing its central line: the histogram is red from bottom to top, yellow from top to bottom. False breakouts are shown in green and pink. When a new trend began, the histogram is predominantly blue.
Detrended Price Oscillator (DPO)
The main difference between this instrument and most other oscillators is the ability to ignore the influence of long-term trends. Eliminating the directional effect greatly simplifies the process of analyzing short cycles, which in turn helps to identify important tipping points in development of long trends.
A flat is the horizontal movement of the DPO near the zero level. Like all oscillators, the signal requires additional confirmation of a binary option trading signals.
Flat indicators in trading terminals
Always remember the combination of «trend indicator + oscillators + trading volumes». It is always used: the differences are only in the number of settings, the ways to indicate the beginning/end of the trend, optimization for specific timeframes and currency pairs. Make sure that they work better than the usual RSI or Keltner Channel, only then bet on a real account. Of the many options, consider three that have shown stable results in the last 2-3 years:
Indicators are not included in the basic set of most trading terminals; they can be easily and freely downloaded on the Internet.
In addition to the moment of the beginning / end of the sideways movement, it shows the possible direction of the future trend. Outwardly, it looks like a MACD histogram with new trading binary signals:
Green and yellow dots show, respectively, when the flat begin/end;
Red color of the histogram signals a price decrease, blue - an increase. Dark colors indicate possible correction, but the accuracy of this signal is low.
Pay attention to the right range 40-60 points wide, but even this is not a trend yet. The price eventually broke the lower boundary, as predicted by Pulse Flat.
The description says that the algorithm is based on «financial time series opposed to Chaos theory». The authors themselves probably do not know what time series are meant, but iVAR works quite reliably.
The problem of oscillators described above is clearly visible: a sideways movement is determined without information about when it will end and where the price is most likely to go. This means that the flat indicator does not contain trend instruments, you need to add them yourself.
Remember that the next candle can break through the sideways movement; it is never possible to accurately assess which way the market will go. If there are open positions, make sure that the expiration calculation is correct. Scalpers are recommended to open range options on the touch to work out the price momentum when the flat indicator gives a binary options signal for a breakout.
The opposite option is the previous one: the data of moving averages and fractals are displayed in a separate window, so as not to clutter the price chart. The signals do not require additional explanations.
A sharp downward impulse is likely due to the release of strong fundamental news or a breakout of a strong resistance level. Trend Filter ignored the short-term event, continuing to show the current trend correctly.
It is better for beginners to stay out of the sideways movement, so you will save your nerves and will not lose your deposit. Even if you managed to make money by catching a rebound from the channel boundaries, this is not your strategy yet. First, you need to understand how binary options signals work on trend periods.