Binary options trading requires at least as much qualitative analysis of the market as classic trading. Moreover, analysis and forecasting price movements are successfully made by classical indicators. Today, we consider analysis of the market with EMA (Exponential Moving Average), Stochastic and RSI. Such a trading strategy is also called binary scalping strategy.
RSI+EMA+Stochastic binary options strategy is profitable and shows good results thanks to a perfectly thought-out combination of technical analysis tools. It is also easy to understand and use.
This strategy can be used in any timeframe, but the 5M timeframe shows the best result, so we will use this timeframe for examples. In this time period, indicators are at their best. On the M1, they show a lot of noise and spurious signals, resulting in most of the transactions being made in the wrong direction. Using RSI+EMA+Stochastic binary options strategy, it’s better to choose the most volatile trading instruments and to trade during the European trading session.
RSI+EMA+Stochastic binary options strategy: settings
We chose the EUR/USD currency pair with 5M timeframe, using GrandOption broker. For the indicators, the settings are as follows:
• EMA red with period 5:
• EMA blue with period 10:
• Stochastic settings%K14, %D3:
• RSI indicator default settings:
How to trade
Using RSI+EMA+Stochastic binary options strategy, it’s worth buying a CALL option when conditions are as follows:
• Red EMA crosses the blue EMA upwards,
• Stochastic should go upward to level 80 but not above level 80,
• RSI should have an upward trend and be above level50
These indicator signals tell us that it’s a good moment to buy a CALL option. However, we buy the CALL option when the next candle starts to form. This candle will be after the candle on which there was a signal from the indicators:
In our example, red EMA crosses blue EMA upward, Stochastic has an uptrend and moves below level 80 (overbought zone), and RSI has an uptrend and moves above level 50. All the strategy conditions have been met, so we can buy a CALL option.
If we analyze the 5 minute chart, the option expiry time will be 15 minutes. If we analyze the M1 chart option, the expiry time is 5 minutes.
To purchase PUT options according to RSI+EMA+Stochastic binary options strategy, conditions are as follows:
• Red EMA with period 5 crosses blue EMA with 10 period downward
• The stochastic has a downtrend but moves above level 20 (oversold zone)
• The RSI is below 50
You can use any trading platform that allows indicator use. You can use Metatrader or any broker platforms; we use GrandOption.
The strategy is good because it allows you to filter the EMA indicator signals and buy options only with confirmation. Therefore, you can include this strategy in your working portfolio and successfully combine it with other binary options strategies, increasing the efficiency of your trades.