Simple Moving Average Strategy For Binary Forex Options
Today I would like to introduce a strategy, which is one of my main trading systems and I guarantee this is a very easy and potential method to trade in the forex markets. It is named Simple moving average strategy but ridiculously it does not utilize the moving average. Besides, this strategy could also be upgraded with an external version of the simple moving average. Although I prefer the exponential moving average as it has more attractive returns and trading with that method would be undoubtedly easier than the first method, today we would pay our attention only to the simple moving average strategy. In this review, I would use the 30 bar exponential moving average as well as two time frames: 30 minutes and daily, in which the moving average will last for 30 bars.
Why Moving Averages?
If you want to measure the trend and market strength, moving averages would be a great solution as it is able to define the continuous and average prices of an asset over the time. Many adjustments are also available with this strategy, creating the base for further technical analysis. The mechanism of the moving average allows us to track the price movement since it releases a set of date while working on the prices trend. Particularly, the moving average would move up if the prices seem to close higher and conversely move down if the prices seem to close lower. In the other hand, the exponential moving average will help us distinguish the new and old data since it put more weight on the later data and less on the old one, resulting in a more current outcome than the original method which weight all data the same.
How this Strategy Works?
The core of this strategy is the 30 days exponential moving average and two time frames. The first time frame is also the longest one and it defines the basic underlying trend that we should follow in this market. The rule is that if the chart indicates that an asset is above the 30 day moving average, it means that trend is bullish. On the contrary, if it lies below the 30 day moving average then it is bearish. However, we must take this flexibly as the price would rely on other factors such as the long term trend, support or resistance… For example, you should be more careful if the prices has exceeded the 30 day moving average for many weeks and is on its way reaching the long-term resistance than the situation where it just moves above the resistance and crosses the 30 day average but with confirmation.
You have to be sure about the presence of the underlying trend as well as whether it is close to a proper turning point, then we might move to the charts with 30 minute bars. I commonly takes about 10 days to have an overview about the price range currently and in the past few days alongside with any support or resistant. If the daily charts were bullish then a bullish confirmation is also required.
It is the signals when the price rise back or return from the 30 bar EMA on your 30-minute chart. In reality, there are days when you receive many signals and also there are days when you get none, and this process might take hours so the winner is one who could wait until the end and remember to check their daily chart regularly before started trading. The normal expiration period would last from 1-4 hours, but if the asset is about to reach a possible turning point, that would shorten your expiration. A signal could be interpreted as a buy one, when the asset move and cross the 30EMA bar from below or is above it and then come back. Typically there are a lot of good signals between the first one which is usually the hardest to get and the final which seems not to bring any fortune but loss.
The moving average strategy really has positive effects on your business as its operation relies on the technical analysis which is the base of almost every advanced technique and is being used by every trader in the market. It is also suitable for the newcomers and could be take as a starting method to head for promising results in the future.