«Spring» strategy: binary options on reversals

• VFX Blog
• Estratehiya

Binary options that have a fixed expiration date require precise determination of the opening time. Although if you first look at how signals work for binary options everything is simple, you just need to click the "CALL/PUT" button. Technical analysis tools of the "Spring" strategy will help you not to make mistakes.

Strategy characteristics

Used indicators

We follow the basic principle of exact binary options strategy "signal confirmation should be carried out by indicators with different calculation algorithms."  The strategy uses two technical indicators:

• Bollinger Bands (BB). The indicator reports the direction and volatility of the current trend, and the horizontal movement of the lines will show flat − in this case, it is better to stay out of the market, especially if the price moves in a narrow channel. When the range dramatically expands (see screen), you can use longer 10-15 minute binary signals and increase the transaction volume by 10-15%.

The main advantage of Bollinger Bands as a channel indicator is the leading signals of a change in the state of the market (accumulation, distribution, termination) and confirmation of the truth or falsity of local breakdowns of significant support/resistance levels.

• The Stochastic Momentum Index (SMI) is an interesting interpretation of the popular Stochastic Oscillator. In the standard version, he calculates how close the current price is. In turn, an SMI shows how close is closer to the midpoint of the High / Low range and is thus more streamlined. The indicator is traded, like the usual Stochastic: exit from overbought/oversold, divergence. It is not included in all trading terminals!

You can easily download the "The Spring" method and SMI on the Internet. The recommended timeframe is from M1-15 and higher, and the expiration period is at least 3-5 bars. If possible, close the deal when the opposite signal appears!

After installing the tools, the terminal's working window looks like this:

Binary options signals:

Once again, we remind you that options are opened when the current trend ends with a confirmed price reversal.

Rise (CALL) option

• The price goes beyond the middle line or upper border of the Bollinger then makes a reverse turn. Looking for the entry point in the area above the midline;
• The white SMI line breaks red from the bottom up and the SMI leaves the oversold zone (above -40);

Fall (PUT) option.

• Price exit below the midline or lower Bollinger Boundary, followed by a turn-up. The entry point should be below the midline;
• The white line SMI breaks down red and SMI leaves the overbought zone (below the level of -40);

If you look closely at the chart, you will see that almost always the conditions for options do not arise at the same time and there is a gap between the signals. How to make money on binary options: wait or still enter at the first sign of a reversal? And which indicator will be the leading signal?

There is no clear answer; it all depends on the characteristics of the asset, the timeframe and the current situation. But if you are a beginner, you need to wait for all the conditions of the strategy to be met. Before using an "incomplete" signal, we recommend waiting for confirmation on vfxAlert and then looking at the state of the Bollinger, the last SMI. If the price has returned to the channel and is near the Central line, make sure that the movement continues, enter at least the next up/down candle of the average BB.

Open a deal on the next candle after binary signals. The expiration time of the options should be at least 5-7 minutes, even if a minute is selected as the working timeframe, as in our video.

Let`s summarize. "The Spring" strategy uses the classic "trend indicator + oscillator" scheme and has no significant advantages over similar methods. Yes, there is SMI as an additional filter, but it first measures the pace (amplitude) of the current trend and only then indicates its direction. This means that the larger the number of periods, the better the Stochastic Momentum Index works.

But at the same time, lag is growing and many signals of short-term options will be lost. The authors of the technique went the way of reducing periods, or rather left the basic setting unchanged, trying to “pull up” the data under Bollinger Bands for mutual filtering of signals. As a result, both tools move almost synchronously, especially at the moments of entry/exit from their extreme zones. Therefore, the statement about mutual filtering of signals is not very correct; in fact, we have only a small delay relative to each other due to the different use of smoothing in the calculations!

An alternative to SMI can be in the form of volume indicators (even tick indicators). The dynamics of changes in open interest can give leading signals of a change in the balance of power between buyers and sellers, confirm speculative free binary signals, short-term corrections when the logic of the oscillators is violated, and the Bollinger begins to "creep" along the upper and lower borders giving only false signals.