Total online: 1
Two stochastic trading strategy for binary options market
Despite the fact that the stochastic oscillator was developed in the middle of the last century, it has already become the classics of technical analysis. If someone decides to dispute this fact, I recommend not to forget that today stochastics is included in the scope of any trade terminal, and some analysts use it even when you study the real estate market.
Of course, such a universal indicator could not be ignored when creating trading systems for binary options, one of which today will be discussed, and the name of this strategy Two stochastic.
Why not one, but two? The fact that the stochastic oscillator calculated over a short period, very often signals the conclusion of transactions. At first glance – that's good, because the more transactions, the higher the chance to make a profit, but really, this is a "beginner" error, as in this case, the prediction quality decreases under the influence of "market noise".
On the other hand, if we construct a stochastic over a long period, increases the probability to encounter the so-called "sticking", when the indicator line is near the limiting boundaries of the range, and occasionally "cheating" trader, making slight variations, for example:
The strategy of Two stochastic borrows the advantages from each of these options and neutralize the above-mentioned drawbacks.
Another advantage of this technique lies in versatility – according to its rules, you can trade almost all binary options brokers, but I recommend to use the services of 24option as the terminal of the company to adjust the work schedule.
Settings of the strategy Two stochastic
First of all, we need a full graph and not the tick line. To access it, go to the web terminal 24option and click the button:
Immediately after this a window will open with the candlestick graph on which you can select multiple timeframes. Since the strategy of Two stochastic optimized for large periods, I chose the hourly chart:
Then use the command "Studies System Manager" is added to the workspace, two additional Windows:
• In the first window, flicking the expanded list of indicators StochasticSlowD with parameters (29;9;9) and StochasticFastD values (29;9) (the first number in parentheses – number of candles for the analysis);
• In the second window in the same way we cling to the indicators StochasticSlowK(9;3;3) and StochasticFastK(9;3).
In the beginning I was not wrong when he said that we need two stochastic, just in the terminal 24option familiar to many traders a "slow stochastic" is divided into two algorithms, each of which separately builds up slow and fast lines.
As argued by George lane, the Creator of this algorithm, price is committed to the previous extremes, and often stops near them. This idea gave rise to concepts such as overbought and oversold, that these hypothetical States, we will have to trade.
Call options it is good to buy in if:
• Red line stochastics are below 30, this situation indicates that the market has been falling and is ready for correction.
• The green line in each window crossed the red bottom-up is a classic buy signal asset, but since we work with binary options, not stocks, currencies and other instruments, and will buy a call option on the value of the underlying asset.
With the purchase of Put options work the opposite:
• Wait, when both stochastics will drop at level 70.
• Buy the option on a fall in the value of the asset after the green line crossed the red indicators from the top down.
The term of the option "standard" define equivalent duration of four candles, but practice shows that this option is better to optimize for each pair individually. It is highly desirable, since currencies fluctuate in a wide range, while others formed strong progressive trends.
Additional comments on the strategy of Two Stochastic
Only what I considered the most widespread version, which is popular among novice speculators. But experienced traders will immediately notice the lack of system – it is not able to identify the prevailing trend, forming a large number of false signals, in other words, transactions are often conducted against the trend.
To solve this problem will help simple moving average, calculated over the 120 candles. In fact, the strategy of Two stochastic will be complemented by two simple rules:
• If MA(120) is directed downward, it is permitted to buy only options Put ("lower");
• If MA(120) is directed upwards, are allowed to buy only Call options ("above").
Also I recommend to trade is not at the intersection of lines of stochastic are in the moment, and just after closing the signal candle, because the indicators into account in its calculation of the closing price, which may change significantly before the expiration of the candle.
|Category: Binary options | Added by: (07.11.2017)