RSI Divergence Binary Options Strategy

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9# Binary options divergence strategy with bollinger bands

Binary options strategy one touch Divergence with bollinger bands

Submit by Joy 22 18/06/2020

Divergence Method of the trading.

What ‘s divergence?

In an up trend that will setup as a bearish trade, you ‘ll see the price making higher highs but you’ll see the indicator making lower high.

In opposite direction?

In an up down taht will setup as a bullish trade, you ‘ll see the price making lower lows but you’ll see the indicator making higher low.

Time Frame 5 min= Time expire 60 min.

Time Frame 15 min= Time expire 180 min.

ATM RSI Histo Triple Stochastic Divergence indicator;

Fibonacci Retracement: XIT Fib indicator.

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The price should be above the upper Bollinger Bands indicator in case of a bearish divergence and in the same manner the price should be below the lower Bollinger Bands indicator in case of a bullish divergence.

When the bullish divergence is spotted (time frame 5 min), it is a signal for buying a 1 hour call option.

Buy When the red bars of the indicator ATM RSI Histo Triple Stochastih Divergence retrace below the dottet black line.

Touch points are the Fibonacci Retracement: XIT Fib indicator.

In the same manner when a bearish divergence is spotted (time frame 5 min), it is a signal for buying a put option.

Sell When the blue bars of the indicator ATM RSI Histo Triple Stochastic Divergence retrace below the dottet black line.

Touch points are the Fibonacci Retracement: XIT Fib indicator.

This method of trading based on divergence can also be applied to Binary otions strategies High / Low but this method of trading is not for beginners.

Share your opinion, can help everyone to understand the forex strategy.

schrempfy (Monday, 26 October 2020 15:39)

is there an addon to get an alert, when the retracement is taking place? I cannot look at the chart the whole day. please help/any advice! ? Thanks!

Ismail (Tuesday, 22 September 2020 21:18)

Hello joy22,
How are you doing?
It is very difficult for me to understand to identify the divergence, specifically the sentence “retrace below the dotted black line” can you please help me understand better, awaiting for your reply,
My email: [email protected]

alexit69 (Thursday, 14 May 2020 18:14)

Yes , Ken , you are missing something : this is not an expert advisor for forex but a a strategy for binary option with a template (tpl) .

Ken (Sunday, 29 September 2020 18:10)

I would like to test this ea, but when I download and unzip, i’m only getting a .tpl file, i’m i missing something?

Binary Options Trading Strategy – Best 60-Seconds Strategies

Today we are going to share our binary options trading strategy with you. This strategy is designed to help you identify whether you’ll like trading binaries and teach you how to trade binary options the right way. If you prefer to play it safe over gambling, you’ll need a strategy or tactic to help you master binary options and other trading activities. This is where our TSG team comes to the rescue. We will provide you with the best binary options strategy.

The main reason we’re interested in learning about trade binary options is the fact that binaries simplify what we’re already doing in Forex. At the same time, binary options also allow us to make more money in the process. We are also controlling the risk.

Binary options are easy to understand. This is coming from someone who has little or no experience in the area. If your favorite approach to trading forex is to jump in on a fast price movement and ride the intraday trend for as long as the momentum lasts, you can learn how to make money trading binary options very quickly.

When we first discovered binaries, the light bulb in our heads turned on. We figured out the same thing that we’ve been doing in Forex can be done. But walk away with 75%, even 95% winning trades because we only needed to get the direction right. No need to worry about how many pips we could grasp in the process.

And that, my friends, is the real beauty of binary options.

What are Binary Options?

Binary options are a form of derivatives that have a fixed profit or loss. Trading binary options is simple. All you need to do is ask yourself a simple yes or no question. Will the price of the underlying asset be worth more than the strike price at the expiration date?

Now, let’s start by understanding how binary options work.

Essentially, we can trade binary options for any type of instrument. Whether it be commodities (Gold, Oil or Silver), Forex exchange currencies (EUR/USD, GBP/USD or USD/JPY), or stocks (Amazon, Tesla or Twitter).

So, the first thing you need to decide upon is to select the asset to trade.

Second, before submitting our trades, each of these instruments has a current value at any given point in time. How to trade binary options depends on our trading skills. It is used to predict where the current value will be some time in the future. In other words, we must use our skills to predict the market direction. This will determine our success in trading binary options.

The market can only go up or down. If we believe the current value will go up in the near future, then we buy a Call option. On the other hand, if we believe the current value will go down in the near future, we buy a Put option. Read more about call options vs put options.

Third, we need to determine what the most critical aspect of trading binary options is. The expiration time will ultimately determine if you’re making a profit or not.

Trading binary options require you to correctly forecast two things:

  1. Whether the market will rise or fall.
  2. Your forecast needs to be accurate during a certain time frame – called the expiration time.

If you’re right on the market direction by the time of the expiration time, you earn a profit. Being wrong means you incur a loss. The way binary options works is that if you’re right on the market direction, you’ll get a percentage of what you initially invested in.

Typically between 75% and 95% and in some cases, even 100% of your initial investment, depending on your Binary Options Broker.

Supposing we’re wrong on the trade, then we’re going to lose the whole amount invested in the short term.

We have made a nice infographic that highlights the four steps on how to master binary options trading.

Now we’re going to focus on step two, which is how to predict the price movement. If you manage to figure this out, then knowing how to make money trading binary options will be a piece of cake for you.

Now, before we’ll outline a method on how to make money trading binary options, we always recommend taking a piece of paper and a pen and take notes on the rules of the best binary options strategy.

In this demonstration, we’re going to look at the buying Calls.

The Best Binary Options Strategy

Our team at Trading Strategy Guides is ready to share with our beloved trading community our 60-second binary options strategy. We don’t just hope this strategy will make you money, we’re certain it will. The mathematical model behind this binary options trading strategy has a proven market edge.

The only tool you need to trade binary options successfully is the RSI indicator.

Even the RSI indicator is not good enough if it doesn’t have the “right” settings. The RSI default settings need a little bit of adjustment if you want to master the 1 minute time frame. We use a 3-period RSI to trade binary options profitably.

Naturally, a lower RSI period means that the indicator will tend to be noisier than normal. But it is more responsive to the immediate price action. Along with the RSI settings adjustments, we also played around with the overbought and oversold readings. We found out that by using an 80 RSI reading for overbought and 20 RSI reading for oversold condition, we get more accurate day trading signals.

*Note: Make sure you adjust the RSI settings before you jump into the binary options trading strategy.

By changing the RSI overbought and oversold line, we have eliminated the noise. So now we’re ready to highlight our binary options step-by-step guide:

Step #1: Find an instrument that is showing a low the last 50 candlesticks. Use the 60-second chart (1 Minute TF)

The 1-minute binary options or the 60-seconds time frame is the best chart for trading binary options. In other words, the best binary options expiration time is the 60 seconds time frame.

We recommend highlighting the starting point on your charts. And the ending point of your 50-candle low that you have identified. Simply draw two vertical lines on your chart through the starting point and ending point of your 50 candle low.

When you count the 50 candle low, you should always start from the current candle. Then go from the right side of your chart to the left side of your chart. If you manage to count 50 candle low, obviously the starting candle point will be your 50 candle low.

Moving forward, it’s time to put the RSI indicator in use and spot if we have extreme oversold reading or not.

Step #2: At the moment the 50 candle low develops, we need an RSI reading of 20 or below

Since this is a reversal trading strategy we need the RSI indicator to show a bullish reversal signal. An RSI reading below 20 shows that the market is in oversold territory and it can potentially reverse.

In our example below, the 1-minute EUR/USD chart is satisfying the two conditions.

Keep in mind that in order to move to the next step, we need the 50 candle low. We also need an RSI reading below 20 to happen at the same time.

We added one more factor of confluence that needs to be satisfied. If used in conjunction with the previous two conditions, it will make you a money maker binary options trader.

Step #3: Look for a bullish divergence to develop between the RSI indicator and the price.

When trading reversals, you need to be as precise as possible. The more confluence factors you have in your favor the more accurate the reversal signal is.

What we need to see here is for the price to continue moving lower after the 50 candle low was identified. At the same time, we need the RSI indicator to move higher in the opposite direction.

If the price moves in one direction and the momentum indicator moves in the opposite direction, it means they are diverging from each other. This signals a potential reversal signal.

Now it’s time to highlight how to find the right entry point for the binary options trading strategy.

Step #4: Buy a Call Option after the first candle that closes above the high of the 50 candle low

The first thing you need to do is to mark on your chart the high of the 50 candles low with a horizontal line. The first candlestick formation that breaks above this high is your trade entry signal to buy a 60-second Call option.

It’s that simple!

After you decide the amount to invest and pick the 60-seconds as your expiration time, it’s time to sit back and wait 1 minute before hopefully collecting your profits.

Step #5: You collect your profits if the next candle closes higher than your trigger candle

If at the expiration time, the price is higher than the price you opened your Call binary options, you’re lucky because you’re about to check-in a big payout.

For example, if you’ve invested $1,000 and your binary options broker offers you an 85% payout, it means that you accurately predicted the outcome of a trade. You get back your initial investment of $1,000 plus the 85% payout which in our case is $850 in profits.

If you want to buy Put binary options, use the same binary options guide, but in reverse.

Conclusion – Binary Options Trading Strategy

Before learning how to make money trading binary options you need a great Binary Options broker. You can’t start hitting home runs right out the gate without making sure you have a binary options broker who wants you to succeed. Secondly, you need a strategy based trading technique to reveal the market direction. You only need to forecast if the price will be up or down during the next 60 seconds, making it very convenient.

We use a heuristic approach to speculate on which way the price is going to move during the next 60 seconds. At the end of the day, traders are looking for a reliable binary options system that will help them make money from trading.

The good news is that the best binary options strategy is exactly that system. Our team is built of many traders with experience in the industry, including binary options traders who know how to make winning trades. We’re ready to help you with every step of the way.

Thank you for reading!

Also, please give this strategy a 5 star if you enjoyed it!

Don’t forget to read our guide on regular options trading for beginners here.

(58 votes, average: 4.29 out of 5)
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RSI Binary Options Strategy – How It Works

What is RSI Binary Options Strategy?

How to use RSI Options Strategy?

RSI is represented as a traditional oscillator with a separate window under the price chart. Its ranges from 0 to 100 and the level of 50 usually divides the indicator’s value into two parts. Additional lines come at the level of 70 (overbought) and 30 (oversold), showing strong price movements. The screenshot below shows how the RSi indicator binary options looks like.

RSI settings for Day Trading

Thanks to a simple and reliable mathematical formula, which calculates relation of recent price gain to the latest loss in a given period, binary options traders can adjust the key parameter for the RSI oscillator – the period of calculation. The default period is 14 bars or candlesticks. For example, if the analysis is made on a daily timeframe, then RSI calculates the value in last 14 days. For the hourly chart, RSI with the same period will take into account 14 hours.
Some technical analysts use Fibonacci numbers for the period from 13 bars for fast aggressive trading approach on short-term charts and 21 bars for conservative trading method on longer timeframes like binary options daily strategy. Choosing the most efficient period depends on individual trading strategy, the timeframe and expirations time of binary options.
Another important parameter to modify is the value of oversold/overbought levels. The default and the most widely-used relation is 30/70, while some of the binary options traders prefer a combination of 20/80 to smooth the unnecessary market noise and avoid too many false signals.

Trading signals

The flexible nature of the indicator and multi-purpose application allowed binary options traders to notice several patterns on the RSI indicator window, and develop different trading signals pointing to a high likelihood of current trend’s reversal. There are four main patterns for different applications and scenarios.

Reversal signal

When an asset is trading in a sideways consolidation range without clear direction, binary options traders take advantage of RSI indicators ability to show overbought and oversold levels. Once the oscillator touched the level of 30 or 70, a trading signal occurs and the trend changes the direction. Therefore, traders should consider buying CALL options on a test of the oversold level and PUT options when RSI indicator reached the overbought zone.

Here is an example of RSI indicator range:

Overbought and Oversold Levels

During a strong trend, overbought and oversold levels can be shifted. This technique is used to measure the depth of possible retracements and corrections. For instance, when RSI bounces off the oversold zone and inches up to the level of 50, that threshold is considered as the overbought level, and new put options can be bought from there. For an uptrend, the condition is the same but mirrored. This pattern is also called a bounce by trend. An example below shows how the threshold of 50 acted as the overbought level.

Bearish or Bullish divergence

This signal occurs when the price action does not come in accordance with the RSI performance. For instance, the chart shows higher highs of the rate, while RSI oscillator draws lower highs. That contradiction is called a bearish divergence as it signals a potential reversal of the trend. Bullish divergence happens when the price of an asset charts lower lows but RSI prints higher lows. Bearish and bullish divergences are usually strong and reliable reversal signals.

Swing rejection pattern Example

This is also a reversal signal, and it has four stages of the action.

Best RSI settings for Swing Trading:

  1. RSI drops to oversold zone as the sequence of strong downtrend;
  2. RSI edges back above 30;
  3. RSI falls again without entering the oversold zone;
  4. RSI breaches the recent peak value.

Best Indicators Combination in RSI Binary Options

Stochastic RSI

This is a combination of two oscillators in one window. Besides the RSI, here is used also usual Stochastic oscillator. The Stochastic RSI indicator has similar patterns as described above with the addition of another line. A crossover of two lines is considered as a confirmation trading signal as well. Both indicators parameters default on the chart below, however, traders can try to modify settings in order to get one of the oscillators slower than the other. That would reduce the frequency of trading signals but increase efficiency.

If you like this strategy, you might also be interested in this Triple Top and Triple Bottom

MACD vs RSI

One of the most popular combinations in technical analysis MACD and RSI. The main advantage of such an advanced RSI strategy is that it combines a slow trend indicator MACD with lagging performance and fast RSI leading oscillator. In this case, bearish or bullish divergence on the MACD indicator has to be confirmed or denied by fast RSI. Once a confirmation signal occurred, it’s time to enter the market, buying call or put options depending on the trend direction.

An example is shown in the chart below:

If you like this strategy, you might also be interested in this Reversal Trading

6 Ways to Get Maximum Gain from RSI Indicator

Trading community de facto applies RSI indicator to define levels of overbuying/overselling levels on market. Even without use of additional filters, indicator works good. Have a look on applying RSI that even more increase accuracy of the indicator.

Standard way to apply RSI:

The first, traditional way – buying option at the moment when RSI exits the zone of overbuying/overselling.

  • when the value of RSI line gets lower than overselling level of 30% usually, bears force weakens and that means, the exit of an indicator from this zone is the right time to open position for raising;
  • when values get higher than overbuying level of 70% usually, one needs to consider variants of entering on downturn.

Buying option is an operation strictly to be provided only by the moment when indicator exits overselling/overbuying zone.

RSI on minor timeframes

2nd way. If you trade turbo options or binaries with expiration time less than 30minutes, 70 and 30 levels not always allow to execute accurate enterings. Period should be decreased for indicator to reach its extreme values more frequent. For timeframe less than hour one may usel RSI equals 5 and 90 to 10 or even 95 to 5 levels.

Example of setting Rsi to 90/10 and 5 period:

RSI with period of 5 on 1 minute chart

3rd way. For additional approval you need to pay attention on higher period in order to see the global trend. Trading binary options opposing the trend is the bad idea, thus signal direction on current timeframe and one above must match together.

That is how signal approve looks on 1 minute and 5 minute charts:

RSI on longer timeframe M5 approves signal on chart M1

Period and levels of RSI should match together on both charts.

4th way. There is scalping technique for supershort deals. This trading method is being frequently applied by american traders. The feature of the strategy is to get large amount of signals during a small period of time. The main goal is to absolutely minimize response time of an indicator.

  • RSI period equals 2 bars;
  • Overbuying limits are also set maximally possible – 99 for overbuying and 1 for overselling.

As usual, this strategy is used on chart M1 or M5. Expiration time of binary option usually does not exceed 5 minutes.

Setting RSI for scalping

RSI Divergence

5th way – searching for divergence on chart is an effective method of getting RSI signals. Divergence is a dissimilarity between chart and indicator values, for example when the chart draws higher and indicator shows lower maximum.

The example of divergence – two maximums on chart are on the same level while on the indicator chart the second maximum is much higher:

The thing to remember – you need to trust exactly what indicator shows, if it grows – we buy option CALL, if it decreases – PUT.

RSI divergence types

The example of entering the position on the basis of RSI divergence:

entering the position on the basis of RSI divergence

RSI & Bollinger Bands

The last, 6th way – to combine RSI indicators and Bollinger Bands, because the first one shows impulsive movements and the second shows the main direction of market movement. As a result we get very precise signals on entering the position.

The rules of trading on RSI are fairly standard. Purchase PUT option by the time indicator line exits the overbought zone, or CALL option, when indicator line exits the oversold zone. But one should enter only in case the price is situated near the bottom line of Bollinger Bands, which should act as a filter. Ideally, the price should exactly overcross the line by the moment of receiving RSI signal.

In case of Сall signal, the price of opening the breakout candlestick should be above the line. The closing price above:

СALL signals with Bollinger bands filter

All the same is true for PUT-signal, in this case the price therewith should simultaneously cross the top line of a channel – Opening price higher, closing price lower (inside the channel):

PUT signals with Bollinger bands filter

The expiration time may vary depending on used timeframe. Ideally, the expiration time should be equal to quantity of bars needed to achieve the floating average (average line of the channel) from the edges of the channel. One may calculate the average quantity of bars needed to pass the distance from one edge to another and divide it by 2.

Conclusion

The most famous and widespread indicators are able to become the basis of profitable trading strategy if one uses it properly. We discussed several simple ways of increasing the percentage of succesul deals through the traditional RSI strategy. Try to use these methods on free practice account.

Traditional indicator have become so merged into the trader’s lives, that many just don’t consider them as the serious trading instrument. At the same time, the majority of more up-to-date developments are based on the same RSI or floating averages. The primary benefit of RSI is its versatility, this indicator might be used on currency pairs, trade stocks or goods with equal success and without loss of quality.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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