Trading Forex with Binary Options

05/17/2013 6:00 am EST

Focus: FOREX

Binary options have become increasingly popular in recent years, and the Staff of Binary Option Strategy shows how you can trade currencies using these instruments.

Every day, every hour, someone is either buying or selling the EUR/USD . And because of the high trading volume of the EUR/USD currency pair, the opportunity to profit from any price movements is always there. Hence, it makes sense to have a binary options strategy for trading the EUR/USD currency pair.

The Strategy
The good news for a binary options trader is the fact that the EUR/USD currency pair is always available as an underlying asset to trade with binary options. This allows you to get a good rate of return without having to make costly bets that have a higher risk level. The binary options strategy for trading the EUR/USD can be used with either the classic digital options, range options, or touch options.

Charting and Technical Indicators
The implementation of this strategy requires the use of 30-minute charts, the MACD technical indicators, and the Parabolic SAR indicators. Since most binary options brokers do not use this level of sophistication in charting and technical indicators, you will need to download an MT4 platform from any reputable online forex broker. You do not need to deposit with them to use the platform.

MACD Indicators
Created in the 1970s by Gerald Appel, the MACD indicator is used to detect changes in the direction, duration, momentum, and strength of a trend.

Parabolic SAR Indicators
Short for “Stop and Reversal,” this indicator was developed by J.W. Wilder for determining the ideal entry and exit point into the market. Essentially, if an underlying asset is moving below the indictor, you should sell (go short). On the other hand, if the underlying asset is moving above the indicator, you should buy (go long).

We will use the MACD and Parabolic SAR indicators to determine the state of the market for the EUR/USD currency pair.

Bullish Market Signs
In order to determine if the EUR/USD currency pair is going bullish, check and see if:

  • The EUR/USD is trading above the Parabolic SAR indicator
  • The MACD indicator crosses from being negative to positive

chart
Click to Enlarge

Bearish Market Signs
For a bear market in the EUR/USD currency pair, look for the following indications:

  • The EUR/USD is trading below the Parabolic SAR indicator
  • The MACD indicator moved from being positive to negative

chart
Click to Enlarge

Once you have determined the state of the market, the course of action that you will take depends on whether the market is bullish or bearish.

Trading With Touch/No Touch Binary Options in a Bullish Market
Although you can also trade with the classic up/down binary options or range options, it is recommended that you select the touch/no touch binary options for this trading strategy. They are easier to trade with as you only have to be concerned if the price of underlying asset price touches the strike price that you selected.

Touch Binary Options
Make sure you have identified the resistance level first before setting the strike price. Once you have identified the resistance point, set the strike price below this point so you can be sure that underlying asset price will touch the strike price level.

No Touch Binary Options
At same time, you can also purchase a “no touch” binary option. With the no touch binary option, identify the price support level first and then set your strike price much lower than the support level to ensure that the price action will not touch the strike price level.

Trading In a Bearish Market
For a bearish market, just repeat the same maneuvers mentioned above for a bullish market but in the opposite manner.

By the Staff of Binary Option Strategy

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