By smart binary strategy, we don’t mean self-executed strategy, rather we can approach trading in a smart way. Instead of waiting for signals from lagging indicators, why don’t we understand what the candlestick patterns are telling us.
The marubozo candles may suggest strong momentum and help you when trading with the trend.
Most binary traders tend to receive signals based on number of indicators, but what if you don’t use any indicators or only use two simple indicators. The information you need is right in front of you on the chart, and yet traders rely on lagging indicators to predict future price movements.
Smart binary trading
If you are going to trade smart, you need to set up your plan correctly. In this strategy, we are trading with the trend:
- Identify the trend
- Wait for a pullback
- Wait for a confirmation candle
When trading short-term binary options, we believe going with the major trend is preferable, but of course, some traders may want to trade countertrend and profit on the reversals. In case you are following the trend, you will most likely want to place your trades after some pullbacks.
Let’s say we are trading 60-second or 5-minute candles. To identify the trend, we need to switch to the one-hour chart and see which candles dominate: the bulls or the bears. If the green candles are bigger, the price is in Uptrend; if the red candles are bigger, the price is in Downtrend.
After we know the trend, we wait for a small pullback and our confirmation candle, which should suggest trend continuation. In our case, the confirmation candle is marubozo, or a candle without wicks. In uptrend, a bullish marubozo would suggest a strong momentum, and price may continue upward.
Alternatively, in a downtrend, we would wait for a bearish marubozo.
Marubozo Call Signals
To visualize the trend, we can use EMA indicator and eventually place Call trades when the price is above the 21 EMA or 45 EMA. As you can see in the above chart, the bears are trying to push the Euro down, but after the pullbacks, the bulls quickly recover with stronger green candles. When the price starts to recover, we are looking for our marubozo bullish candle.
Marubozo Put Signals
Alternatively, in a downtrend, we are looking to place Put trades when the price is below the 21 EMA or 45 EMA. On the above chart, you can see the bears are much stronger, and the bulls are unlikely to take control over the U.S. dollar. We want to see a bearish marubozo candle and then eventually purchase Put options.
To make profit, we need to trade smart. The above strategy is simple but that doesn’t mean it is easy to make profit. First, you need to learn to identify trends and then wait for a confirmation candle that will eventually tell you the price is in strong momentum and the trend will continue.
When trading with the trend, you may want to escape trading in the overbought or oversold levels, and the RSI indictor will help you with that.