The cryptocurrency market is on the rise: Bitcoin continues to update price highs and there are all prerequisites for the continuation of the bullish trend in 2021. Even football clubs have digital coins. Technical analysis is a great option how to make money on binary options - let's start by looking for reliable entry points.
Let's define the terms. In technical binary options strategy, “entry point” does not mean the exact price of an asset, upon reaching which one can open a new or close the current deal. I mean a zone 5-7 points above/below the calculated value, it can be wider when volatility is growing or less in a sideways market.
Each of the following methods for finding entry points has its characteristics and deserves a separate big article. We will not go into detailed descriptions of how to use the techniques, read blog, but here is only a direction for your own ideas based on standard indicators present in all trading terminals.
1. Trend lines.
The "classic" method is to see where the market is going, the start/end of rollbacks, where you can open trades. The image shows an uptrend, top binary options signal on bounces from the support/resistance line.
2. Moving Average (MA) crossover.
Crossings indicate a trend reversal, open a binary option at the next candlestick, and exit when an opposite signal appears or an obvious reversal. On strong trends, you can additionally enter on a rebound from Moving Average, as shown in image.
3. Alligator by Bill Williams.
One MA can not give the right binary trading signal, if only because it is the most lagging technical indicator. You need several moving averages with different periods, usually called "fast", "medium" and "slow". Bill Williams managed to find a combination that works well on most cryptocurrencies and is understandable for beginners: downtrend, when the lines are arranged as follows (from top to bottom): "Jaw" (blue), " Teeth "(red), "Lips" (Green). For uptrend, the situation is reversed. Do not open when intertwining lines - "Alligator sleeps".
Oscillators and channels
In addition to filtering delay MA, oscillators add important information about the current state of the market – how much its balance is shifted towards buyers (bulls) or sellers (bears).
Channel indicators can be considered analogous to trend lines; they are built automatically according to the specified parameters, which reduce the risk of visual errors.
The indicator algorithm considers a zone below level 80 to be «overbought» after which a downtrend should begin, above level 20 as «oversold», followed by an uptrend. The entry points will be the exit of the Stochastic chart from these zones. The base values are 80/20, you can change it depending on the characteristics of the asset, for high volatility, 70/30 is recommended. This way the binary option trader can remove more market «noise».
Another popular oscillator that uses a histogram for signals: the most reliable entry points will be at the intersection of zero level MACD from the bottom up for CALL and from the top down for BUY. The exit is made at the beginning of the turn in opposite direction.
3. Bollinger Bands.
The first channel indicator that showed good results on all trading assets, especially on the side ranges of 30-50 points. On strong trends, it starts to «follow» the price near upper or lower border. In such a situation, it is difficult to determine the moment of the beginning of the reversal, it is recommended to use MA for additional confirmation of binary option signals!
In order not to show indicators, in reality the price always goes from one level to another. Most of them are formed by market makers, who then begin to push the market in the right direction. It is difficult to recognize the moment of such a game, but it is possible and we get an excellent point for a profitable option.
1. Local max/min.
Levels that even a beginner can identify and open a trade on breakout/rebound. The logic of top binary options signal by levels is simple: a breakdown of max/min, especially if it is weekly or monthly values, is very likely to mean a change in the balance of power of buyers/sellers, the beginning of a new or continuation of current trend. Bounces on the contrary indicate that the fight is still going on; you can also make money on this!
2. Fibonacci retracement levels.
The Fibonacci sequence is found in many natural processes; everyone knows it and gradually began to be used in trading. They have no other explanation other than the psychology of «doing like everyone else». Even if you analyse the clusters of pending orders of market makers, you can see that they are often located along the grid lines. Therefore, the opening points on them are quite reliable and predictable.
3. Other levels.
There are many author's strategies on how to calculate and trade levels. As an example, the Murray levels are given, and the Pivot Point is also mentioned, which is determined by the opening/closing prices of the previous day.
Candlestick and technical patterns
Despite the pressure of high-Frequency trading (HFT), visual analysis of patterns continues to bring stable profits even in the cryptocurrency market, should be in the arsenal of any trader.
1. Candlestick analysis.
The Japanese candlestick chart and combinations are over 200 years old, the patterns continue to work in profit, especially reversal ones. As in the case of Fibonacci, there is a psychological component when working out; most traders learned from one book, in the process of finding entry points, most act in a standard way. The value of binary options trading signals from this does not decrease, but, as in case of trends, you can see what is not really there. Look for the strongest models like «Doji»!
2. Price Action.
The authors talk about «modern reading and improvement of candlestick analysis» although, apart from the change in names of the main patterns, no cardinal changes are observed. For example, the «Pin-Bar» shown in the figure is just a classic «Hammer» candlestick, and so on. The technique has many followers; it would be wrong not to mention it as a source of entry points.
3. Technical patterns.
If in the two previous versions the main attention was paid to the analysis of market at current moment, which is actually indicated by candlestick combinations, then the market dynamics is important here: how are local max/ min located (see example), how they relate to historical data, live binary signal, etc.
These patterns are more suitable for medium-and long-term trades – the appearance of an entry point requires their full formation, even with deviations from the basic form. On timeframes up to M30, this is almost impossible, trading on incomplete models requires a long experience, it is not recommended for beginners!
Calculation of expiration
If you watch an advertisement for binary options, there are some advantages: minimum deposits, transaction volume from $1. One point of price movement in the desired direction from the opening level is enough for profit. All of this is true, but when beginners start trading they are faced with expiration or the time during which the option is open. After that, the deal is closed automatically - sometimes the price turns in the right direction after a few seconds, and we are already at a loss.
The time limit is a serious obstacle to successful trading; the ability to correctly calculate the expiration comes with experience, although the basic principle may be that «option expiration date should be at least 2-3 candles of WORKING timeframe». Example: the signal is binary signal software for M5 timeframe, set expiration from 10-15 minutes. Trading practice has shown the following patterns:
- Reversal combinations of candlesticks, breakout points of technical pattern lines, rebounds from supports/resistances are worked out on average in 3-5 bars;
- After breaking a significant price level, it is better to increase the value to 7-10 bars;
- Intraday trend options will be the longest. Rollbacks are possible, after which the movement is restored, so in order not to leave the market early, especially when big transaction amount, set an expiration of 10-15 bars.
We have shown basic techniques of how binary options work using technical analysis to determine the opening points of options. They have been tested by generations of stock and foreign exchange traders. They are also applicable to cryptocurrencies, you just need to periodically monitor the results, make adjustments correctly for current situation.