«Break Flag» Strategy

On the market of binary options , trading with a trend is most prevalent: this strategy is the least risky and highly profitable. How do we determine that the trend will continue and will not end just when you decide to make a bet? We will answer this question, with help of the graphic market analysis and the «Break Flag» strategy.The strategy is based on the graphic figure of a Flag, and is suitable for options trading with any term of expiry and any underlying assets.

The Flag – a figure of trend continuation, which means that the trend, after a slight rollback, resumed with renewed vigor, and it is possible to earn on it.

 

The features of a flag

1. More or less long-term price movement within a pronounced trend (upward or downward). This is the «pole» of the flag.

2. A changeable price movement in a narrow corridor in the direction against the trend. It rolls back the prices which form the so-called «flag».

3. Formation of the flag figure by breaking down of the border. If the pole looks upward, then after the rollback, the flag completes itself, breaking through the upper limit, and if the shaft is aimed downwards, a figure is being formed by breaking the lower ends of the border at the bottom.

4. Thereafter, the trend is resumed, the price is moving again in the original direction (in the direction of the pole).

 break flag

The trading algorithm of the «Break Flag» is a pretty simple strategy: first, you need to find the figure of «flag» on the candle chart, and then wait, when there will be a breakdown of one of the flag borders. You can then open the option in that direction, which was a breakthrough to – in the direction of the original trend.

Caution! Choose a time frame chart, corresponding to the option’s expiry. For example, for the binary options trading, it is needed for a 60 seconds chart, 1 minute or 5 minutes, for a classical Binary – 15 minutes, but the long-term options must be set from 1 hour to 1 month.

Review this strategy example using a trading platform of Verum Option.The platform has a user-friendly interface, it is possible to choose the time frame from 1 minute to 1 month and trading 7th types of binary options with a bet of just $1.

On the 15-minute chart of the EUR / USD, we can see a clearly formed flag. The pole is uptrend, and the cloth – a roll back down.

flag strategy

Then we see a breakthrough to the upper border of the flag: green candle goes beyond the flag. This means that the “up” deal may be opened in the up direction.

break flag strategy

As you can see, our forecast is correct, once the flag figure trend went up again, it means that the option would have been profitable.

Perhaps, the most important thing in this strategy – this time to detect the formation of the flag. It is not necessary to use the indicators: if you look closely at the chart, we can see that figure clear enough.

Tips:

  • if after a strong trend, a reversal pattern occurred (for example, a candle “hammer”, “shooting star”) or the figure of uncertainty («doji»), possibly, this is the first signal of flag’s formation;
  • watch out for prices back against the trend: the formation of the cloth of the flag (the roll back) is usually shorter than the pole (trend).

Even a novice trader can use this strategy. For example, if you are a beginner, you can try to open not just a demo, but a real account at Verum Option (visit website) with an initial amount of just $ 5.


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