Recommended for Newbies

The Geek’s Rising/Falling Tide Binary Options Strategy

This is a strategy that I originally intended to create constant signals on short term charts, something like the PSAR or Parabolic Stop and Reverse. I like to use momentum and often trade it on the swings so I though it could work in this fashion. What I discovered is that it doesn’t, or at least I can’t make it work, but what I can make work is a nice little short term strategy I like to call the Rising Tide Strategy. Unlike most of my strategies this one is not trend following, it targets swings in momentum and is designed to always be signaling. Not like in the way of the PSAR but in the way that the charts will always be tradable whenever you open them up. I suppose you could apply trend to it as well, and weed out a lot of potentially false signals, but those “falsies” are part of the strategy and highly tradable, if you do it right. Because it is based on swing trading I have to recommend this for intermediate and advanced traders only.



What Is The Geek’s Rising/Falling Tide Strategy

The market is full of old sayings. One I like is “A rising tide lifts all ships” meaning that when the market is rising all/most stocks will rise and when it is falling all/most stocks will fall. This strategy embraces that principal and stop-and-reverse theory using MACD histogram and two time frames. It doesn’t matter which time frames you use so long as you stick to the same ones and don’t go jumping around between a lot of different charts. The longer term time frame will be your “tide”. When the tide is rising you trade calls, when the tide is falling you trade puts. Conservative traders might use weekly and daily charts, or daily and hourly charts, but I like to use this for my short term trading on hourly and two minute charts. The idea is that when MACD is bullish in the longer time frame you trade bullish swings in the shorter time frame and vice versa when MACD is bearish.



The signals:

Calls: MACD is bullish and rising on the hourly charts, this is the tide. Enter calls with 5 minute expiry on bullish crossover of MACD on the 2 minute charts. Additional signals occur anytime MACD ticks higher on the 2 minute charts while it is bullish on the hourly charts.


Puts: MACD is bearish and falling on the hourly charts. Enter puts with 5 minute expiry on bearish crossover of MACD on the 2 minute charts. Additional signals occur anytime MACD ticks higher lower on the 2 minute charts while it is moving lower on the hourly charts.



Why This Strategy Might Suck

This strategy might suck because it is intended for short time frames and short time frames are well known to be volatile and highly susceptible to random news events. It also might suck because it is a non-trend following swing trading technique. This means that you may encounter more false signals than normal. It also might suck because it signals a lot of trades, you may be making several trades before the first one even closes.


Why This Strategy Doesn’t Suck

This strategy doesn’t suck because it is based on a standard indicator and well accepted trading principals that produce well documented, profitable signals. It also doesn’t suck because it doesn’t rely on trend or other indicators that can can weed out as many good signals as they do bad ones. With trend following signals you often have to wait long amounts of time for prices to retreat and set up for the next trade, this strategy aims at trading swings in both directions regardless of trend. It also takes advantage of momentum by entering into multiple trades during each movement. As such this means that signals can come one after another making it highly profitable for experienced traders.



My Last Thoughts On The Rising Tide Strategy

I think this is a good sound strategy. It produces a lot of high quality signals, and some falsies too, but more good than bad. It is a solid foundation for swing trading that takes advantage of momentum and allows traders to profit repeatedly from what other strategies might call a single signal. The addition of support and resistance, trend lines and/or Fibonacci Retracements can be a big help. These lines help spot the ends of swings and provide set up’s for additional signals, although those are for a different discussion. Newbies who are interested in learning to trade swings may think to practice this in a demo, perhaps starting out with only trend following entries and trading once on each crossover (which pretty much makes this a simple MACD strategy employing two time frames).