Having a set strategy for trading binary options eases the trading routine for those who want to take it up as a full time career. A tried, tested and reliable strategy makes sure that the trader does not feel as though he was gambling. Good strategies are those that have survived the very diverse market conditions and still managed to let the investor make a steady stream of returns that he can rely on. Good strategies are aligned to the trend in one way or another and the use of moving averages is a good foundation to base your strategies. Here are some simple strategies based on moving averages that newbies can try out for regular profits.
Moving average crossovers
Trading the moving average crossovers is one of the most straight forward ways of having a set play-book that gives people signals for entering or exiting the market. In this strategy, an investor can pick a currency and have charts that have two or more moving averages. The common reliable moving averages are the 200, 100 and 50MA. The larger numbers are referred to as the slow moving averages while the smaller numbers are the fast moving averages. In this strategy, when the faster moving averages cross from above or below a moving average, a buy or sell signal has been made. For example, if the 50MA crosses the 200MA from above, it is your cue to sell.
The strategy is reliable in profit minting and still gives the trader a clear call or put trading signal. It is one of the few strategies that fall in the high-probability-low-risk category. Many trading systems (including auto-trading scripts) are complex upgrades of this strategy. Long term binary options traders prefer them because they always signify a shift in the momentum and give chartists early signs of where the markets are headed next.
The short term moving average crossovers more often than not occur near some psychological levels on the chart. Round figures (on currencies) have through time been known to bring about a lot of market volumes because many people buy or sell options near them. Traders can combine a mixture of the MA crossovers and the psychological levels to come up with some reliable support and resistance zones.
Moving average bounces – golden bounce
The 200-day moving average is watched by major institutional traders. The line is also respected on the shorter time-frames such as the hour and 15 minute charts. When the price action approaches it, fails to penetrate the line and retracts to the original direction, traders take that as a cue that the trend is likely to continue over a sustained period of time. People trade the bounces just like they would trade the daily pivots. To some extent, a slow moving average can act like a moving support line; giving binary options traders a one-glance means of telling if the market is bullish or bearish.
Moving averages are very reliable in organizing your trade strategies, especially if combined with the brilliant money management options that binary options trading platforms already provide.