A Binary Options Tactic Called «Multichannel»
This system for options trading will appeal to fans of channel trading, since it is based on the well-known channel trend and volatility indicator, the Bollinger Bands. The “Multichannel” strategy works perfectly on all foreign currency assets, it sees more than 85% of options close in profit, and it allows the trader to increase the amount in their account stably.
The Bollinger Bands in binary options – the operating principle of the strategy
Trading on this strategy is carried out according to the principle of channel trading, and it uses three Bollinger Bands indicators with specific settings. The RSI indicator is used to confirm trading signals. Why do we need a triple price channel? In this system, each of the new channel boundaries, which should be touched by the price, is a confirmation of the indicator signal. That is, the more channel boundaries the quotes touch, the stronger, and therefore, more accurate, the signal will be. With the help of the RSI indicator, you can receive confirmation of the beginning of a new trend, which will be a reversal of the indicator moving average at the extremes of the market. As a result, you will receive a classic trading signal to enter the market with a forecast of quote movement in the direction of the rebound, and this signal will be further confirmed by three more indicators.
To ensure that trading on this strategy is as efficient as possible, it should be used only on a trading platform with an integrated set of technical indicators – this will allow you to receive more accurate signals and react more quickly to a market situation by concluding a transaction. For example, in this article, all of our examples of strategy trading are on the Binomo terminal, as it is equipped with the proper set of technical and trading tools.
Configuring the template
First, you need to select an underlying asset whose market is showing wave movements for the asset price – this will increase the cyclical nature of the trading signals. After that, you need to add the above-mentioned indicators on the price chart with the necessary settings:
- Bollinger Bands – 3 indicators with a periodicity of 50 and deviations of 4, 3, 2
- RSI – periodicity of 8, extrema marks 70/30
In our trading example, the chart interval of M1 is used, but if desired, this system can also be used on the M5 timeframe.
After configuring the strategy template, you will see the following markup on the chart:
Signals on the Bollinger Bands strategy «Multichannel»
As we said earlier, trading on the strategy is carried out according to the classic channel principle with the only difference being that a strong breakthrough of the first channel boundary is used as the trading signal. If the price after the breakthrough touches the second or even the third boundary, the signal is considered very strong. It is also important to notice the format of the candles that break through the channel. Here we need to pay attention to all the reversal candle patterns: the hammer, doji, hanging man, candle absorption, and pin bar. Having determined such a signal, it is necessary to obtain confirmation from the RSI indicator in the form of a reversal of its moving average on the market extremum, after which you should quickly conclude a transaction.
A trading position with an UP forecast is registered when the following happens:
- the price breaks through one or more of the upper channel boundaries
- there is a reversal candle (in our case, the doji and hammer) – not an obligatory condition
- the RSI moving average has reversed to the oversold zone (at level 30)
A trading position with a DOWN forecast is registered when the following happens:
- the price breaks through one or more of the lower channel boundaries
- there is a reversal candle (in our case, the pin bar) – not an obligatory condition
- the RSI moving average has reversed to the overbought zone (at level 70)
For the M1 timeframe used in the strategy, the optimal expiration of contracts will be a period of 5 minutes – 10 minutes. Also, this strategy works with high efficiency on the M5 interval – in that case, the duration of the options should be 30 minutes. With these parameters for system contracts, you can close more than 85% of your options in profit.
To reduce trading risks as much as possible, employ the standard management parameters – reduce the amount of the transaction to 5% of the volume of the account. Traders with a small amount of trading capital should register lots of the smallest size. For example, on the Binomo (visit website) terminal the minimum option cost is only 1 dollar, which allows for the most correct calculation of risks and makes it safe to trade with little capital.