Lately I see more and more trading robots, software and all sorts of automated stuff for binary options trading. All these golden nuggets promise riches beyond imagination, without requiring you to have any prior knowledge, any financial education, just plug and play… or plug and get paid. Cool, huh? Pay 100 bucks (or even get the software for free if you deposit with one of their recommended brokers) and then make a million bucks – you don’t even have to trade because the software trades for you. Amazing! But some of you don’t believe this fairy tale. For you, the non-believers I have prepared a strategy which I will name (Not) a Money Making Machine.
(Not) a Money Making Machine – What is it and How to Use it?
This strategy will not give you 99.99% accuracy, it will not make you rich overnight and you need to be able to read a chart to use it profitably; of course, the basics of price action are a solid must. It’s easy to trade but difficult to master so let’s begin: you will need Meta Trader 4 or any other charting package that lets you plot 2 Exponential Moving Averages and a MACD. The EMAs will have the settings of 50 and 100 periods while the MACD will use the default settings of 12, 26, 9. Your chart should look like this one below:
Ok, now you have to take a look at the EMAs to see the trend: if 100 EMA is above 50 EMA, the trend is bearish. If 50 EMA is above 100 EMA, the trend is bullish – I am not sure if I need to explain the terms “bearish” and “bullish” but I think I don’t have to; after all, I did tell you that you need to have the basics. Good, once we have identified the trend we will wait for a retracement, which will be identified for us by the MACD. If the trend is bearish, a good retracement will be signaled by a move of the MACD above the zero line. If the trend is bullish, a good retracement is a move of the MACD below the zero line. So far we have talked about trends and retracements according to this strategy, but what’s the entry? Well, it’s the end of the retracement and the resumption of the trend, of course. The end of the retracement will be signaled by the histogram bars of the MACD; when they go below/above the red line, we will consider the retracement over. It sounds complicated but it isn’t. Look:
Picture too small? Don’t be lazy, open a chart and slap a MACD on it! You did that? Great, now let’s look at some trades:
Let’s recap: for a Put we need EMA 100 above EMA 50, the MACD histogram to go above zero and then to go below the red line (signal line). For a Call we need EMA 100 to be below EMA 50, the MACD histogram to go below zero and then to move above the red line of the MACD. It is also very important to look at the slope of the 2 moving averages and watch for early signs of trend reversal. For example, the second Put signal on the chart above comes when the 50 period EMA already started to move up and on top of that, price already made a higher low and a higher high (which are signs of an uptrend) so I wouldn’t have entered that trade. Anyway, with a short expiry time, you would have been OK… probably.
Why “(Not) a Money Making Machine” Sucks?
Well, it’s not automated, it doesn’t have 99.99% accuracy and it doesn’t give a lot of signals so it must suck for some. Well, different strokes for different folks. It all depends on what you’re looking for. If you’re a newbie, I recommend you stay away from this strategy because it cannot be traded mechanically; you have to pay attention to some other things (like the positioning of highs and lows, slope of the MAs, etc.)
Why “(Not) a Money Making Machine” doesn’t Suck?
It uses a very sound principle which has withstood the test of time. OMG that sounds cheesy, but yea, in my opinion, the best time to trade is during a trend, after a retracement. If the trend is not there, don’t trade or look for other assets that show a good trend. If the 2 EMAs are close together, the market is probably taking a breather; again, stay away.
Wrapping it up
Like I said, this is not a money making machine. Not by itself at least. It can become one but it needs something very important: you. You can make it a money making machine if you choose well what trades to take, but to do that you need to have some knowledge about how the market works and you need to be disciplined. It can be further improved so if you are willing to do that together, subscribe to the forum thread of the strategy. Take care and good luck if you need it.