Full Review of the “Most Profitable Pattern Ever” Binary Options Strategy
I don’t know about it being the most profitable pattern ever but it is one that binary options traders can use, and profit with.
I am sure I don’t have to explain just how dubious I was when I first began to investigate this strategy. Lots of people say they have the best strategy, or a winning strategy or a never-fail strategy and for the most part they are all wrong. This strategy, believe it or not, actually follows through and is one that can be used by binary options traders… even though it still isn’t the most profitable entry ever. The thing is, its a little complicated to understand so I think it possible that more than one trader has used it the wrong way, or even skipped right over it. Something this strategy has going for it is that the author specifically says this is for higher time frames and intended for longer term expiry.
What Is The Most Profitable Pattern Ever?
This strategy is posted by PhillipPirrip at Babypips.com, one of their master contributors. It uses the 20 and 50 day EMA’s with the addition of the stochastic oscillator. If you know me you know that I love stochastic, chaotic little devil that it is, so is one reason I like this strategy. Phillip presents this as a trend following strategy but I want to make clear it is not; its a good strategy but it is also a swing or retracement strategy. At no time does he take the trend into account. It’s possible to apply trend to this strategy, and he even uses a trending situation in his scenarios but what he does is trade OB/OS swings using the stochastic. The moving averages are part of the set-up but again, are not used to determine trends, merely as signals for the signals.
This is how it works. First thing you have to do is wait for stochastic to enter either the overbought range or the oversold range. When it is there you then wait for the shorter moving average to cross over or under the longer term average, depending on where stochastic is. If the oscillator is OB, then you wait for the 20EMA to cross over the 50EMA. If the oscillator is OS, you wait for the 20EMA to cross under the 50EMA. This is where I think confusion can start to set in; this is not your buy signal. Trend following strategies may use such a crossover as a buy in the first case or a sell in the second. In this strategy it is merely your starting point in the quest for a good signal.
Once you identify the crossover you have to wait again. If stochastic is overbought, you have to wait for it to become oversold; if it is oversold you have to wait for it to become overbought. When this happens you wait again, for another moving average cross in the direction of the original crossover, this time confirmed by a STOCHASTIC crossover. If you started with stochastic in OB range, have waited for it to retrace to the OS range and have now witnessed another bullish crossover in the EMA’s you can enter a call when stochastic crosses above the lower signal line. The same is true in reverse; if you started with stochastic in OS territory, have waited for it to retrace to OB territory and have witnessed a bearish EMA crossover you can enter a put when stochastic crosses below the upper signal line.
Why This Strategy Might Suck
This strategy might suck because it is overly complicated. Not complicated in a way that means too many indicators, or too many rules. It’s complicated in a way that means it may take days, weeks or months for a signal to arrive. Not only that, the “pre-signal” EMA crossovers are actually good short term signals, they may happen again and again while a market is trending or testing support/resistance, and produce a ridiculous number of whipsaws. Oh, another thing, stochastic won’t necessarily retrace all the way back to the other extreme, so what do you do then?
Why This Strategy Doesn’t Suck
This strategy doesn’t suck because it uses standard indicators, higher time frames and in the end is a good starting point for stochastic swing traders. The way it is presented is good because it helps get you in the swing of the market before you are signaled to enter a trade. When you do enter there is a high probability of success but like with all trading is not guaranteed.
My Last Thoughts
This is an OK strategy but definitely not the “most profitable trading pattern ever”. In fact, it’s not even really a pattern. Its a complex chain of events leading to a moving average crossover confirmed by a stochastic crossover. Don’t get me wrong, its a good strategy and one that can most certainly be used, but you have to take it with a grain of salt. I recommend this for newbies through expert. Newbies should use it as an example and learning tool for trading stochastic, eventually building yourself up into a swing trader. Experts can use it as they see fit, you’ll either like it or not, if you like stochastic you’ll like this one and if you want to get to know stochastic this is a way to do it.