Advanced Course
23/06/2015 Chris Morton
The 300 video series are lessons are for advanced traders only. We recommend (if you haven't already) to watch the BO100 & BO200 series before viewing this series on more advanced concepts. Reason being there is a lot of good information that progresses your knowledge and understanding on how to trade binary options.
BO301 Lesson - Learn how to trade 60 seconds binary options with Price Action
In this video Sam gives 2 examples of trading strategies that could be used to trade 60 second binary options. The examples include price action and technical indicators .
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BO301 Lesson - Learn how to trade 60 seconds binary options with Price Action Transcript
Welcome to the first video in our Binary Options 300 series. This is Binary Options 301, 60 Second Options-- Price Action.
If you haven't already done so, I would recommend that you watch the Binary Options 100 series, and Binary Options 200 series. The reason being there's a lot of good material in both of those series. And each series has progressed and become more advanced as these series have gone on. So if you haven't watched the Binary Options 100 series, or Binary Options 200 series, please go back and do so.
Here's a brief overview of what was covered in both series. In Binary Options 100 series-- Japanese Candlesticks. Basic Money Management. Trading the News, Part 1. I gave an example of trading strategy, and also recommended some binary option brokers. If you haven't got a broker, then please go back and watch that video-- Binary Options 102-- as I gave an insight into a few brokers and give you a demonstration of their trading platforms.
Binary Options 200 series covered a number things. Some of them being Fibonacci Retracements, Supports and Resistance. Chart Setups -- that one was a very good video, Binary Options 206-- Trading the News, Part 2, and Hedging Strategies .
So as mentioned in this video, I'm going to give some 60 second option strategies. There's a few things you should know before I give these strategies. First of all, trading 60 second options, in my opinion, definitely has higher risk involved than trading longer term binary options.
There are two reasons for this. One, I believe price is a bit more random on 60 second charts rather than, say, hourly charts. And also, trading 60 second options, you may be opening more positions in a day, in a week, when compared to higher time frame trading. So it's good to keep your stakes low, and trade a minimal percentage of your capital when trading 60 second options.
Please also note that the strategies I will give in this video can be edited and changed. You may find a way to make these strategies more profitable. And please go ahead and do so. And please also note that these strategies need to be backtested. So once you've viewed this video, please go and backtest these strategies just to see how profitable they are before you start trading.
So our first strategy for trading 60 second options requires the following indicators-- a 50 moving average, a 100 moving average, a 200 moving average, a stochastic set to the default of 14, 3, and 1. The trigger we'll be looking forward to open calls and puts will be pin bars. And we will also be looking for confirmation of overbought and oversold on the stochastic. So let's go to a price chart, and I'll show you how this strategy works.
On the screen, I have a one-minute chart, or a 60 second chart, of the pound against the US dollar. I have all the indicators set up in the chart-- the 50 moving average, the 100 moving average, the 200 moving average, and the stochastic down the bottom here.
The first step to this trading strategy is to wait till the 100 moving average, or the green moving average, is between the 200 and 50. I've coloured the 200 and 50 in red, and the 100 in green just to make these indicators a bit easier to read. So we want the green to come in between both reds-- to be sandwiched in there. That's our first step to trading this strategy.
The second step is to identify the direction of the moving averages. All three are heading in a steady downwards direction. And the 200 moving average is above the 50. So we're looking for opportunities to place puts. If the moving averages are heading in an upwards direction, and the 50 is above the 200 moving average, then we'll be looking to place calls.
Now how this strategy works is we're waiting for price to pull back into these moving averages. And we're looking for a pin bar against this first moving average, or a clear rejection of this first moving average. If those signals are not given, then we're waiting for a pin bar to appear somewhere between these two moving averages-- the 50 and the 100. If price moves into this area, the space between the 100 moving average and 200 moving average, then we're no longer looking for signals as price could reverse, and we could see strong upside momentum.
Once we have a pin bar within this area, or a rejection of this first moving average, we would just use the stochastic as a confirmation. If we're looking to place puts, then we want overbought signals on the stochastic. So signals over 80.
If price is uptrending, we're looking for bullish pin bars, and bullish rejection against the first moving average. Then we're looking for an oversold, or under 20, confirmation on the stochastic.
OK, so this is yesterday's price action. Once again, this is the pound against the US dollar. And it's a one-minute chart. So our green moving average is between the reds. We're good to go. We're moving in a downwards direction. The 200 is above the 50, so we're looking to place puts. Price pulls back, and we have this clear rejection right here of the first moving average.
If we mark that area, we have a vertical trend line. You'll notice that our stochastic is showing overbought. So all signals agree, we could place a put there. And price falls on the downside for the next two minutes. So that's within trade for us right there.
Price then comes on the downside. Price comes back on the upside. We don't have a rejection against this first moving average. So we're now looking for a pin bar within the area of the first two moving averages. And we have a pin bar here, a very small pin bar, but it is a pin bar. Let's use our vertical line once again. You'll notice we're showing overbought. Other opportunity to place a put, and price falls on the downside for the next four minutes. So another winning trade there.
Price then moves on the upside. We enter this area or space between the next two moving averages. So we're not looking to place any trades, as this is our signal that price could move on the upside, or the momentum could be bullish instead of bearish.
We move back into this first area. We have this pin bar. That's our signal. We'll mark that with a vertical line. But you'll notice our stochastic doesn't agree. We're not showing overbought. So we wouldn't have taken that trade. And good thing we didn't, because we have a doji. So we may not have profited from that position.
Our moving averages then get out of sync. So we're no longer looking for positions. They come back in sync here. Price moves back into this space, it's very tight. But we have a pin bar right here. Let's mark that like so. Our stochastic agrees. We could place a put. And price falls on the downside for the next three minutes.
Let's carry on. We have another pin bar here. Let's mark that area. We're in between the first two moving averages, so everything looks great. Our stochastic agrees. We could place a put. Price falls on the downside very strongly. Let's carry on.
OK, we have a rejection of this first moving average here. Let's mark that. So we have our stochastic. Mark that. We have a vertical line. But our stochastic doesn't agree. But it does agree with this next rejection, which is here. And price falls on the downside.
Price moves into this space, but there are no pin bars. And then price moves into the second space, which is our danger zone, so we're no longer looking to place puts. Our moving averages get out of sync. And then nothing really happens for the rest of the day as market volume dives, these moving averages don't line up. There is no strong bearish or bullish momentum.
So just to demonstrate how this strategy works. Once again, we have three moving averages. We wait for the 100 moving average, or the green moving average, to be center to the other two to create this sandwich effect.
We are then looking for the rejection of the first moving average. If price is uptrending, then once again, the first moving average below price is where we are looking for a rejection. If price moves in between these first two moving averages, we're looking for pin bars. If it moves into the area of the next two moving averages, then we are not looking to trade any signals.
And then our final step to this strategy is to seek confirmation from the stochastic. For example, there's a clear rejection here. Our moving averages are in alignment, but our stochastic does not agree. It's not showing overbought.
Let me now demonstrate a strategy for trading 60 second options. We will need a single indicator this time. The stochastic set at the default, once again, at 14, 3, 1. Our trigger will be an engulfing candle, or pin bar, on supports and resistance. And our confirmation will be the stochastic, overbought and oversold.
Let me demonstrate this strategy on a price chart. This is a 15-minute chart of the Euro-US dollar. I have my indicator-- the stochastic-- already on my price chart. The first step to this binary options trading strategy is to identify supports and resistance on the 15-minute price chart.
We're looking at yesterday's price action. And we want to identify clear supports and resistance over the 24 hour period. So first of all, we have this clear push in the upside, and then reversal. So we have a resistance here. And we just mark all this with a horizontal line. This area was also resistant earlier on in the day.
We have a number of pushes and pullbacks here that creates resistance and support areas-- let's mark them. Resistance. Resistance. We have a support here. Another support here. And price bounced off this support a number of times. So that's our support and resistance marked on a 15-minute chart. We will now go to our 60 second, or one-minute chart, and look for engulfing candles, or pin bars, on these levels of supports and resistance.
Now in previous videos, I've taught that supports and resistance are zones within financial markets. Not a specific price. But because we're using such short-term price charts, we are looking at this specific level for engulfing candles and pin bars.
And the rule is that an engulfing candle, or pin bar, must touch these levels that we've marked in order to use as a signal to open a call or put position. And then we have our confirmation-- overbought and oversold. So let's go to a one-minute chart, and look at today's price action against the supports and resistance we marked from yesterday's price action.
So this is the start of trading on this one-minute chart. Price comes on the downside. And we have this big pin bar against this support. Our stochastic is showing as oversold. So we have an opportunity there to place a call option. Our pin bar touches and actually goes through the supports, and price goes on the upside in the next 60 seconds. So we have a winning trade there.
Let's carry on with today's price action. We have a bullish engulfing candle right here. But our stochastic does not agree. So we wouldn't have taken that position. And good thing we didn't, because if we placed a call, it would've been a loss as price fell on the downside.
Price then falls below this supports and resistance. So this support is now resistance. And then we have another bullish engulfing candle, and price closes above this area. So it's now acting as support. But our stochastic doesn't agree. It's actually showing oversold. We want overbought. Let's carry on.
This support is broken. It's now turned resistance. Price comes up. We have a bearish pin bar-- a signal to place a put against this resistance. Our stochastic doesn't agree, so we would not have taken that position. Let's carry on.
We have a bullish engulfing candle here, but our stochastic doesn't agree. Let's carry on. Another potential trade there, but our stochastic doesn't confirm.
OK, we have a trade here. Price comes down to test this support. We have a pin bar, a bullish pin bar. Our stochastic is showing oversold. There's an opportunity to place a call option. And price moves very strongly on the upside. Let's look for some more trades.
We have a bearish engulfing on this level here. But no stochastic confirmation, so we wouldn't have taken that position. We have another bearish engulfing on this resistance line. Our stochastic does agree. We could place a put. And price falls on the downside. Another winning trade. Let's carry on.
We could have taken this position here, which would have given us a loss. We have a pin bar-- if you can count this as a pin bar-- here's the rejection. Our stochastic just agrees, so you may not have taken this position. It's just showing oversold. So you may have placed a call there and made a loss. But you may not, as this stochastic wasn't that clear. Let's carry on.
Bearish engulfing on this level, but no stochastic conformation. We have some signals here, a pin bar and bullish candle, but no confirmation.
And then the rest of the day, prices moved away from those support and resistance areas. So there were a number of opportunities to buy calls and place puts, but very little confirmation. But those that did confirm, I believe we had one losing trade, but still, the confirmation wasn't that clear. So we would have either had one losing trade for the day, or no losing trades for the day, depending if you took this position or not.
So that's the second binary options strategy. And as mentioned at the beginning of this video, please backtest these strategies. And please modify them if you believe you can make them more profitable.
Thank you for watching the first video in this Binary Options 300 series. Please continue watching this series as there are more trading strategies on their way.
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