The 5-minute Trading Strategy
Modern services offer traders a wide range of functionality for effective market analysis. Professional platforms for technical analysis used to only be available to a limited number of users, but now they can be used by anyone. The most popular one is TradingView (link – https://www.tradingview.com). At the trader’s disposal are many thousands of indicators and auxiliary tools. It is also possible to create your own tools through programming in a simple scripting language. This is a real revolution in online trading.
In this article, we will consider a binary options strategy that will enable you to trade 5-minute contracts on the Binomo site. You could also use other trading platforms, but this company has proved itself in the best way. We should emphasize that analysis will be carried out directly on a third-party service – a live chart from the TradingView portal. Basic functionality that meets the needs of most traders is available for free without a subscription.
The operating principle of the strategy
The system is based on two indicators – a smoothed moving average and a tool for wave analysis of the market from the developer LazyBear. The combined use of such different tools allows you to trade on signals that have gone through double filtering. The Waves strategy uses two indicators with very different mathematical formulas for calculation.
The wave theory of pricing on the market is fundamental. It explains many of the phenomena that traders observe on the chart. To sum the concept up briefly, it is as follows. The market is a continuous process where periods of “tides” are constantly alternating – falls and growth of the price. The trader’s task is to learn to recognize these waves and understand the whole picture of what is happening. This will allow you to build effective forecasts by following a well-known pattern of pricing.
A brief overview of the indicators used:
- Smoothed Moving Average – this is the simplest indicator from the Moving Average category. This is the type of MA that has a pure averaging formula. Simply put, its position on the chart is determined by the average value of the price for the period specified in the settings. However, there is also significant potential in its simplicity. Given the inertia of the market and its “waves,” this indicator allows you to recognize subtle moment of direction changing.
- WaveTrend with Crosses – this is an oscillator that analyzes the market from several points of view. The calculation formula is quite complicated. However, in practice it is easy to use the tool. Signals are given in the classic oscillator way – the intersection point of two curves. For clarity, they are visually emphasized on the chart.
Configuring the platform and terminal
To begin, open the Live chart from TradingView (https://www.tradingview.com) in one tab of the browser, and in another open the Binomo terminal (https://binomo.com/en). On both sites you need to choose a trading asset, the time interval (1 minute), and the candlestick chart construction type.
Then we open the window to add the indicator and insert the following names in the search line: “Smoothed Moving Average” and then “WaveTrend with Crosses [LazyBear].” Copy it without quotation marks. You can also find them manually in the relevant sections of the directory, as indicated by the arrows in the picture above.
To facilitate the process of filtering false signals, it is recommended to manually add two levels to the chart window at “25” and “-25.” The “Horizontal Line” chart tool works best for this.
Trading signals for the system
You should enter the market only after the intersection of the WaveTrend with Crosses lines. This should be combined with a breakdown of the simple moving average on the candlestick chart. However, there are a number of nuances to consider.
- The signal for an increase is the appearance of a point below the manually added “-25” level, as well as the breakdown of the ascending candle of the MA line downwards.
- The signal for a decrease is the formation of a point above the “25” level, and also the breakdown of the MA curve of the descending candle.
In the picture above you can see the signals which, provided that 4-5 minute transactions were selected, will bring a profit. False signals are also marked there. From a fundamental point of view, they are due to the low level of market activity, so they should be ignored.
Immediately after you see the signal on the TradingView platform, you need to go to the tab with the Binomo terminal to open the transaction.
In conclusion, we want to note a few key points for traders to consider when trading. First, you need to control the financial risks. Second, you should monitor the volatility of the market. The optimal time for trading European currency pairs is from 16:00 to 20:00. Third, check the expirations of your transactions. They should be 4-6 minutes. But the Binomo platform (Open Demo) resets the period to the minimum by default. This should be taken into account.