Hello my dear readers and fellow Community members,

Today I am going to discuss in this article in detail about the use of the Technical Analysis to trade Forex Binary Options. Before we proceed, we need to understand- what is Binary Option and how to trade it profitably?

Well, it is nothing but to predict the price of any instrument at a particular time will be above(CALL) or below(PUT) the strike price(PRICE OF OPENING THE TRADE). If one thinks that the price will be higher then he opens a CALL option and if he thinks that the price will be below the strike price then he opens a PUT option. To know more about the concept of Binary Trading one can go here.

The essence here is to predict it and earn the fruits. But the market is no slave. It does not do what we say. But we have to see the rhythm of the market and predict its direction. Of course, it is not a simple task. Many of those reading know it already that predicting markets is very difficult or next to impossible. But the idea here is not to be correct all the time but to be correct most of the times.

To help you predicting the market direction correctly I am going to share with you this simple yet effective technique of Technical Analysis.

Say we have selected the EURUSD pair.
  1. First, we shall open the HOURLY chart of the pair.
  2. Place 34 EMA applied to closing price.
  3. Place the 5 EMA applied to high price.
  4. Place 5 EMA applied to low price.
  5. Place ADX 14 applied to closing price.
  6. Place level 25 on ADX14.
After applying all this your chart will look like this.

EURUSD HOURLY CHART

Now the criteria to open the CALL position is as follows.

  • If the Hourly candle has closed above 34 EMA.
  • If the Hourly candle has closed above the 5EMA high.
  • If the ADX 14 is above 25 level and rising.

If all of the above criteria meet then you can open a CALL option for the next candle and be assured that the next candle will end higher than the candle just closed. I have attached a chart for easy understanding of the concept.

EURUSD HOURLY CHART
From the figure above we can see that if we open a call at the closing of the candle when the above-mentioned criteria are fulfilled then the percentage of winning increases.

Now the criteria to open the PUT position is as follows.

  • If the candle has closed below 34 EMA.
  • If the Hourly candle has closed below the 5EMA low.
  • If the ADX 14 is above 25 level and rising.

If all of the above criteria meet then you can open a PUT option for the next candle and be assured that the next candle will end lower than the candle just closed. I have attached a chart for easy understanding of the concept.

EURUSD HOURLY CHART

From the above figure, we can see that out of total 19 setups we have only 6 failed setups. Which is a very good result. You can also place your support and resistance lines and avoid placing CALL when price approaches the resistance zone and avoid placing the PUT when the price approaches the support zones.

Before I conclude I must warn you all that the Binary options trading is a risky venture as it can lead to heavy losses if you take the wrong decisions. So please keep these few things in mind before placing trades,
  • Don't buy an option with a large part of your capital.
  • Don't overdo the things.
  • Keep a record of your trades.
  • Don't just place a trade because you want to. First, analyse the market and then buy an option.
I hope that you will find the technique mentioned in this article useful for you. I wish you all a very profitable trading.
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