Review of the Trend Line Binary Options Trading Strategy
This is one of the basic strategies listed on the website ForexStrategiesRevealed.com. The website is focused on forex trading but many, if not most, of the strategies are just as applicable to binary options as they are to forex. Take this one for example. It is a basic strategy that the author does not even give enough credit for. In his description he says it is based solely on trend lines and does not include any indicators. No indicators indeed! Trend lines are one of the oldest and most reliable technical indicators there are. What better way to follow a trend and profit from it’s movement than to use a trend line. It is good that Joseph posted this strategy because all to often traders neglect the simplest, and often most effective, methods of analyzing the market. One refreshing thing about this strategy, Joseph recognizes its limitations and is welcoming of suggestions and tweaks. The commentary following the strategy is packed full of additional tips.
What Is The Trend Line Strategy
This is a basic strategy good for beginners. It in fact used one (1) indicator, trend lines, and for that is fairly reliable. The idea is to utilize the trend lines to predict trend. Then use the line as a target entry for forex or binary options positions. In order to place a trade a trend must first be established, this is done by connecting peaks and troughs. If the trend is up, that is two or more consecutive higher troughs, then you trade bullish. If the trend is down, two or more consecutive lower peaks, you trade bearish. Once trend is established you must wait for the price to move back to the trend line and touch it. Once touched, when price begins to move away from the trend line you can enter a trade in the direction of the trend.
Why This Strategy Might Suck
This strategy might suck because it is very simple. There are no confirming indicators to help determine trend or to help pin point entry. Further, only using two peaks or troughs to predict trend is not enough for a real strong signal. There is a lot of room for this strategy to create false signals and whipsaws. Additionally, there is no talk of time frame with this strategy. While I think it could be used in nearly any time frame it is important to have an idea of which one to use in order to predict proper expiry time for binary options.
Why This Strategy Doesn’t Suck
Plain and simple, this strategy does not suck. One reason is it’s simplicity. There are not a lot of indicators and esoteric analysis to cloud the screen, confuse traders and ultimately create bad trades. Using only one indicator is not something I often recommend but if you are going to trade that way then using trend lines is one of the better methods. As a basic strategy it is good for newbies. Trend and trend following are among the top ways to profit from trading. Starting with trend lines is the best place. As a tool it can be used in any time frame, the longer the time frame the stronger the trend. Incorporating multiple time frame analysis is one way to improve upon the basic strategy here. It also works well with other indicators. Adding another signal to confirm a trend bounce is a great way to prevent false signals.
My Last Thoughts On The Trend Line Trading Strategy
This is a good basic strategy, but it is a very basic strategy. For one, the trend is not confirmed by time frame or other indicator. Second, signals are not confirmed by any other indication either. In order to get really good, strong, profitable signals I like to see at least two indicator in confirmations. That being said it is a good place to start, especially for new traders. Use it in a longer term, and thereby slower, time frame and build upon it. Learn to predict trend in multiple time frames and add secondary indicators to help pinpoint the best entry points. Candle stick charts are one way, MACD, stochastic or both are another.