Moving average convergence divergence
An important stage in the establishment of a professional binary option trader is the process of creating your own trading strategy.
And making this one of the first steps towards getting real profit, you need to define a core set of tools and techniques used in technical analysis.
Over the years, currency and stock markets has developed many binary option trading systems, strategies and indicators, which ones you will use – is a matter of personal relationship to the market and your point of view on the processes that cause prices to change.
How to start your strategy?
It is better to start with clear and simple algorithms. MACD - is an indicator based on the calculation of convergence/divergence of MA – moving averages. This is an excellent example of such a trading algorithm.
Positions of trading system based on MACD indicator are simple enough, but before you start to consider them, it is necessary to identify the key states of the indicator, on which MACD trading is based, the power and receiving signals on binary option buying or to the closure trading.
The most significant level – is "0" mark, the intersection of its histogram and MACD signal line indicates the beginning of a trend change.
The MACD histogram is used in order to inform about the magnitude of the movements’ momentum – the longer the line – so momentum is stronger. It is also a great reference for closing positions – as soon as the length of the lines begins to decline, it can be assumed weakening trend momentum, and hence its possible reversal.
MACD signal line performs the function of confirming signal, as usual, it slightly delayed with respect to the histogram. You can adjust the display so that the signal line is crossed "0" only after the close of the regular candles and drawing on the opposite side of zero point.
But it is not so simple. Competent and lucrative trading on MACD requires the ability to distinguish proven and false trading signals. It's enough to be careful and not trying to maximize profits by any necessary act.
Confirmed signals are as follows:
It requires fixed breakout of mark 0 signal line with a simultaneous drawing of a histogram, which length of lines increases.
False signal also has its signs:
Trader should closely monitor the signal line – zero mark must be passed without fail. You should enter the market only after closing of the bar which has led to a trading signal appearance. Upon confirmation of a trade signal, it is necessary to buy an option in the desired direction.
The better way to set an expiration time is to choose 6-8 timeframe time period. For example, if you are trading on H1 – then your expiration time should be set after 6-8 hours from option buying.
A trader makes his own decision to enter market, in this case MACD trading requires extreme care and compliance with all the rules of the trading system. Observe the conditions described strategy and money management rules – in this case, you can earn a decent income using just one MACD indicator.