Doji and Engulfing patterns: non-indicator strategy for binary options
- VFX Blog
Technical analysis indicators provide a stable profit on binary options. Beginners tend to put them on the schedule as much as possible forgetting the principle of "a lot of information is not always good." You can trade without them at all using candlestick analysis.
The methodology was developed in Japan and for 2.6 centuries has not changed significantly to date. Includes more than 200 patterns, but the strategy uses only two of them, which can be immediately applied in trading even to binary options for newbies.
The picture shows the structure of a candle. The strategy does not use “shadows”, opening point of option is determined by the size of the “body”.
The first pattern showing trend reversal will be "Bullish / Bearish engulfing" - the body of the current candle completely closes the body of the previous one. We open the option at the opening of the third candle.
The second candle is inverse colour. An exception is for very small first bodies similar to «Doji».
The next «Doji» pattern. The strongest reversal signal and highlighted in a separate section of candle analysis. The basic rule - the less often there is a candle «Doji» the more important it is. In the classic «Doji», the closing price is equal to the closing price +/- several ticks. The option opens on the third candle after the appearance of "Doji".
In any case, such candles (even if false) require a binary options trader special attention; otherwise, you can get a big loss from a sharp trend change!
Candles cannot be the only decision making a factor. Patterns indicate only the probability that the market will reverse or continue the current trend. Additional confirmation will be vfxAlert binary option trading signals working on technical indicators.
Open a trade on the next candle after binary signals. Time of expiration of options has to be not less than 5-7 minutes even if as a working timeframe it is chosen of minute, as in our video.
Recommendations for use:
- If the second candles break through strong support/resistance levels, this strengthens the signal;
- 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 platform!
- You can choose a cautious strategy of gradually increasing the position as the signal is confirmed.
- If you cannot open a transaction at the beginning or at the strong point of the figure, do not look for an entry point where it does not actually exist. Candlestick analysis should always be supported by technical instruments, especially support/resistance levels. See the price movement on multiple timeframes, the presence of divergences and sharp changes in volumes.
- Expiration term. Look to steer a middle course: too short (1-2 minutes) and too long (10-15 minutes) option life is considered dangerous. In the first case, the price risks «not having time» to go in the right direction - we get a loss. In the second, the market will have time to turn around, which again gives a negative result.
- Newbie’s often trade on a template, forgetting that the market situation is never repeated 100%. Candlestick combinations that bring profit a year ago can now lead to losses. We need a constant control of the correct development of patterns!
Let's summarize. Candlestick analysis will be relevant for at least another 10-20 years, despite the growth in the use of AI and HFT in trading. Most stock transactions are still made by people, which mean that its principles will continue to work and make a profit binary options signal.