Full Review of the “The Swing- 15 Minute Technicals” Strategy for Binary Options
The Swing is a fairly standard approach to forex trading. This style is well suited to binary options including currency pairs, stocks, indexes and commodities.
The Swing-15 Minute Technicals is a fairly advanced form of trading. The system is based on support/resistance breakouts on 15 minute charts and is great for day and day-to-day trading. The strategy is very detailed and should be easy for experienced traders to follow. Signals are taken on charts of 15 candlesticks with support/resistance lines drawn on the longer term charts. Initially intended for trading Euro and British Pound dominated currency pairs this strategy will work in any liquid market.
What Is The Swing-15 Minute Strategy
The strategy is broken into four sections detailing different aspects of the trade. The first section describes just how and where to take signals. The second section describes how to size your positions. The third section details profits targets, an aspect less important for binary traders than for forex. The fourth section gives tips on how best to deploy the strategy and possible factors for the trade.
In the first section the the author, Olivier, details how and what you are trading. In this technique he is trading short term breakouts of support and resistance. In order to find these support and resistance areas he uses three different time frames. The first chart to use is of 4 hour candles. If your package does not generate 4 hour candles you can also use 1/2 day bars, or even daily bars if necessary. This establishes the primary trend and support/resistance. To help make sure the lines you draw have real significance be sure to connect at least three points. After that is done move down to charts of hourly candles and do the same thing. In order to prevent confusion use different colors for the different time frames. This will help you to identify which lines are more important once you drop down to charts of 15 minute bars. Once your charts are finished it is time to wait for a signal. This should be done before the start of the trading day so that you are ready to trade once the markets open.
Signals are generated when there is a breakout above or below a support or resistance. The breakout is dependent on a close above or below the chosen line. A simple break of the line without a close should be considered a whipsaw or false signal until confirmed by a close above/below. Once you have a close it is time to open a position. For breaks below support or trend open puts, for breaks above support or trend open calls.
On this chart we see price retreat from 4H resistance and then drop below support drawn on the 1H chart. Note how there is no close “next support” to interfere with the trade. A break above the 4H resistance would have reversed this position to calls.
The second section of the strategies concerns risk/reward and position sizing. This step has it’s roots in equity options position sizing and is relevant for binary options as well. Olivier suggests a position size that is a certain percent of your capital, 1.5% in this case. This approach helps limit losses to sustainable amounts and also allows trade sizes to increase as account size increases. For binary options, since the risk/reward profiles are fixed, I think this is a good idea but might suggest using a larger number. At 1.5% you would have to have an account of $10,000 in order to trade $150. I think somewhere in the range of 3-5% depending on skill level may be more appropriate. Olivier also uses this calculation to help set stop losses but this does not apply to binary unless you are using an early out option.
The third step involves profit targets. For Olivier, these targets are for taking profits or adding to positions depending on how the trade is progressing. For binary traders these targets are useful in determining whether to trade hourly or daily positions. To apply this to binary I think the closer the target is to the entry point the shorter the time to expiration. If the target appears on the 15 minute charts use hourly or shorter if possible. If the target appears on the 1H or 4H charts use hourly to daily expiration.
The fourth section gives some tips and guidelines for using the strategy, an added bonus since some of what he says in the earlier portions of the article is not clear. He starts with the assumption that trend, support and resistance are very subjective. This I know to be true. There are dozens of ways to determine these areas and they do not always coincide with each other. He also suggests not trading on big news days or when the market is quiet as they are not the best days. A further suggestion, which answers a question I had, tells you not to trade if the first profit target is above the next area of resistance (in a bull trade) or below the next support(in a bear trade) because the likelihood for profits is diminished. Basically he says make sure the path ahead is clear before entering into a trade.
Why This Strategy Doesn’t Suck
This strategy doesn’t suck because it utilizes a common form of day trading and provides relevant targets for stops and profits. It also doesn’t suck because it uses multiple time frames. The use of multiple time frames is the basis of most of the successful strategies I have seen. Even though this strategy is meant for forex it is easily adaptable to binary options. The targets are useful tools for any form of trading, in binary they can help determine the type of expiry to choose.
Why This Strategy Sucks
This strategy sucks because it is not good for inexperienced traders. This is a fairly complicated technique and one that takes a seasoned pro to perfect. Like the author himself said, support,resistance and trend are very subjective and take experience to utilize correctly. Experience is what a traders needs to know when to use the strategy and when not to use it. Experience is also what will help a trader have the discipline to wait for the right signals and then trade on them, even if they are counter to the primary trend.
My Last Word
This strategy is great for binary day traders, it provides good signals for short term trades with daily, hourly or even shorter expiration. The use of multiple time frames is excellent, it is something I would suggest every trader use regardless of style. The caveat is that this strategy is better suited to experienced traders. Without experience and discipline newer traders may get themselves into trouble trying to trade short term break outs. Trading short term moves like this often means trading against the primary trend and everyone knows that the trend is your friend.
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