Full Review of the EUR/USD Simple Strategy for Binary Options Trading
When searching the net for free binary options strategies I most often find junk. The best systems are often behind a pay wall and the ones that aren’t are either no good, poorly conceived or just plain bad. It is too easy for just about anyone with any kind of trading idea to make a post. When looking into the EUR/USD Simple System I was not expecting much else. The system is simple, the explanation is one of the shortest I have seen but packs a real punch. Originally intended for forex trading this system is readily applicable to binary options.
What Is The EUR/USD Simple Strategy
This is a simple system that utilizes two well know and well respected indicators. The author leads into the strategy saying something to the effect that it is a specific strategy for this pair but I think it could be applied to any currency pair and probably stock indexes and commodities too. The system is based on Parabolic SAR buy and sell signals that are confirmed by MACD. The author uses the standard settings for both indicators and uses charts of 30 minute bars. The best suggested time frame for the strategy is between 8am-12pm eastern time when the New York and London sessions are overlapping.
How To Use The EUR/USD Simple Strategy
The strategy is very easy to use. The first half of the signal comes from the parabolic sar. When the parabolic sar gives a buy or sell signal get ready to trade in that direction, bullish or bearish. The actual buy or sell signal comes when MACD confirms that signal. When parabolic sar gives a buy signal MACD must cross the zero line from below to confirm, a weaker MACD signal is not to be taken only zero line crossovers. The same is true in reverse, when parabolic sar gives a sell signal wait for MACD zero line cross from above to confirm it. No confirmation no trades.
Another bonus for this system is that it also gives some tips on exits. These tips are not really applicable to binary options but did lead me to some other ideas. The exits signal is either when MACD crosses back under the zero line or “when the market starts trading sideways for a while”. We can’t use these as sell signals with binary options but we can use them in other ways. A sell signal could be a chance to utilize a hedge or even a straddle technique that could result in two winning trades.
Why This Strategy Does Not Suck
This system does not suck because it uses two well respected and trusted indicators. It does not suck because it uses more than indicator and requires confirmation. It does not suck because it can be used on any currency pair and when I checked against the SPX it appeared to be working well there too. It does not suck because it can be used in multiple time frames and it does not suck because it offers signals for hedging and straddling. This strategy does not suck because it embodies the basic characteristics that I consider most important in a great strategy. It can be used in multiple time frames and relies on a convergence of indicators to generate a signal.
Why This Strategy May Suck
There are a couple of reasons why this strategy may suck. The first is that it does not take trend into account. I think that if there were some consideration to trend or at least a convergence of signals in more than one time frame it would alleviate some of the problems I see here. First, MACD is a lagging indicator, waiting for a zero line cross for confirmation may keep you out of some winning trades. If you were trading with the trend then a weaker MACD signal could be taken with relative success. Second, because there is no consideration of trend this strategy will generate signals that are counter to trend. Counter trend trades are sometimes highly profitable but more often than not they result in losses. Because of the lagging nature of these signals I do not think it is a good strategy for counter trend or contrarian trading.
My Last Words On The EUR/USD Simple Strategy
I think this is a good strategy. It provides clear, easy to read and well respected signals. It is easy to use and easy to apply to binary options. For best results I would suggest using it in conjunction with some other trend determining technique to help weed out poor signals and traps. Trading with the trend is one of the most basic rules of trading and one that no strategy should overlook. The EUR/USD Simple strategy would be great for an experienced trader who wanted to try trading a shorter time frame. It could also be good for a beginner who has a working knowledge of trend determination but I would suggest they stick to a longer time frame such as daily bars until you get the hang of it.
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