Full Review of the Trend Momentum High/Low Strategy for Binary Options
Most of us know how good German cars are; the luxury of a Mercedes, the power of a BMW or the reliability and low price of a Volkswagen. But we don’t really know (at least I don’t) how good German Binary Options Strategies are so today I am going to review one. Fortunately the website from where I got the strategy (www.forexstrategiesresources.com) had a translation of the entry rules so let’s see what this German strategy can do.
How to use the Trend Momentum Strategy?
First of all we will need an indicator which we talked about before and which is already built in the Meta Trader 4 platform: Momentum. We will use a setting of 18 for this indicator and a level set at 100 (double click on the indicator, select Levels and add one at 100 or manually drag a horizontal line on the indicator). The second indicator used is an Exponential Moving average with a 24 period. This one is also default for Meta Trader 4 so you should have no problems applying it to a chart. Ok, once you’ve done all that, it’s time to find out what the strategy actually tells us about the market: when a H2 candle (the strategy uses only the hourly chart) closes completely above EMA 24 or at least 80% above it and Momentum is above the 100 level, we can buy a Call with an end of day expiry. If an hourly candle closes below EMA 24 and Momentum is below the 100 level, we can buy a Put with an end of day expiry.
As you noticed, the strategy has clear rules for the time frame used and the expiration time; that’s because it was developed specifically for Binary Options so you don’t have to bother with adapting it. In fact, it’s probably better to leave it as it is and not make any major modifications. Of course, if you do and find out how to improve it, let the Forum knowJ. Ok, here’s a chart with how the strategy looks like and some nice entries:
As you can see, all trades finish In the Money so the strategy is not too shabby after all. The dotted vertical lines indicate the end of day and are just a visual aid for the purpose of this exemplification. Also, please keep in mind the fact that the chart above is “cherry picked” and your trades will not look so good each time. Let’s see a short summary of this easy strategy:
- An hourly candle closes completely above EMA 24 (or at least 80% above)
- Momentum is above the level of 100
- An hourly candle closes completely below EMA 24 (or at least 80% below)
- Momentum is below the level of 100
Expiry time: End of Day
Why does this Strategy Suck?
Its biggest weakness is the ranging market and a lot of the false signals will come in that kind of market. Even its title points towards the fact that it’s a trend strategy and should be used accordingly. However, even in a ranging market the Momentum indicator will keep you out of bad trades. Something that I try to avoid is the 80% rule. I don’t really like it and I consider that a better signal is given by a full candle closing above or below the Exponential Moving Average.
Why this Dtrategy doesn’t Suck?
First of all, it’s so easy to use that any green trader can just pick it up and trade it. On top of that, the rate of success is pretty high so it’s a great way for any newbie to get acquainted with Binary Options. Of course, sound money management rules should be implemented but this is something I think everybody knows… I hope. The fact that it was developed for Binary Options doesn’t leave room for error when it comes to the timeframe and expiry time because those are already embedded in the rules and by using an hourly chart, the strategy clears up a lot of the market “noise”.
Wrapping it up – Newbies Friendly but could cause Headaches
To be honest, I didn’t really like the strategy when I first found it; I thought it’s too simplistic and that a lot of false signals will appear, but after testing it for a while, I started to see that its simplicity is one of its greatest advantages. I consider The Floor Trader strategy one of the best around, but there’s no way I could recommend that to a newbie because the rules are too confusing for such a trader. This one on the other hand is easy and friendly. Test it and Trade it!