Trading the Range
Using the Range binary options strategy is quite popular among traders. Experienced traders can quickly grasp its essence and start applying it in their daily trades.
We recommend you using the range strategy at a trusted broker which provide fair price ranges.
The main point of this strategy is that when you trade in a certain price range, you have to consider that the price does not rise above or below certain limits. Thus the price for a specified time will remain sideways.
How to figure out a range on the chart?
If a trader assumes that the price will move within a certain price range, he can delineate its boundaries by using lines. These lines are not by all means parallel to each other. For example, the chart may look as a Triangle.
It is not necessary to wait for a breakthrough, you can try to trade inside the range of this triangle.
Once you have determined a certain range you can start trading. As noted above, it is logical to apply this strategy only when you are confident that the price will not go out of the defined borders.
Consequently, it will make a small upward and downward movement inside. A trader can buy Call options when the price reaches the lower bound range and accordingly buy Put options, when the price reaches the upper limit of the corridor.
At the same time you can buy Up/Down Range options when a breakthrough of support or resistance level is noticed on the chart.
How to use Range binary option strategy?
As an example of intra-band trading we can use the following situation. Suppose a trader has chosen to trade binary options on Swiss Franc-Japanese yen (CHFJPY) currency pair.
The figure shows a part of the range where you can use the Range binary options strategy with Call/Put and Up/Down Range options.
This chart shows that the price of the trading instrument varies between levels of 116.00 and 116.75. In this situation you can use the Range binary options strategy.
To do this, you have to buy Call options when the price reaches the lower limit and buy Put options, when the price reaches the upper limit.
In case of a breakthrough of support level you can buy a Down Range option and on a breakthrough of resistance you can buy Up Range option.
How to trade after the range is over?
Nevertheless, it is important to remember that sooner or later, any price range, no matter how stable it has been, will be over. What can we expect after that are: usually strong impulse market movements in one direction.
Therefore, you should not only be able to determine the trading range in which you can earn money, but also learn to anticipate situations in which the market can dramatically go out of range.
This can happen, for example, before the release or during the publication of important macroeconomic data or speeches of central bankers.
A few hours before publication, the price may have been located within a certain range, as market players at this time cannot determine the direction of the market movement, expecting a strong driver. By the way, in such moment triangle forming can begin on the chart.
It is recommended to finish trading using this strategy at least half an hour before the news publication. As seen from the above example, the Range binary options strategy is sufficiently profitable. In order to get more clear signals, you can use additional indicators, such as volume indicators, for example.