Forex binary trading strategies can be as complicated or as simple as a trader wants. For example, a trader can use the floor trader pivot lines with price bar reversals to identify an Out of the Money binary option, which limits risk on entry. Here’s an example.
Forex Binary Trading Strategies
The USD/JPY 5-Minute binary option chart below\s shows the Pivot line plotted using the floor trader’s pivots. Price approached the pivot line but showed significant weakness as the bar went down but then buyers stepped in and pushed price halfway back up. Then a bullish price bar follows by another test of the pivot line. Expecting price to go up, a long OTM binary was entered with a risk of $27.75 per contract (excluding exchange fees).
After price reaches the >111.84 strike price and slows down, profits were taken.
Here’s another example for forex binary trading strategies on the AUDUSD after hidden divergence forms. The 15-minute binary option chart for the AUDUSD shows that price is making higher lows and the Stochastics is making lower lows. In other words, the Stochastics showed a significant push to the downside side but it is not confirmed by price making lower lows. An Out of the Money binary was entered with a risk of $33.25 per contract. Again price moves up and the binary produces a profit of $39.50.
However, forex binary trading strategies also include trading market reports with limited risk as well. A recent example of this was the Bank of Canada Rate Announcement in May 2017. The 15-minute USDCAD binary chart belows shows two positions, both long and short. In this case, the risk on the long was $17.75 per contract and the risk on the short was $19.50 per contract.
After the rate announcement, price moves down dramatically and profit of $54.25 per contract on the short side was realized (after allocating for the loss on the long position).
The advantages of trading forex binary options are:
- Exchange fee is only $2 per contract versus the typical pip spread cost on spot forex
- Risk is limited on entry
- Binary Options are available 23 hours a day (6pm to 5pm next day) and some of the forex pairs (like the EURUSD and USDJPY) have a strike width of only four pips making it very easy to use the OTM strategies
- Costs do not increase during market reports or volatile sessions
Gail’s new books, New Trader’s Guide to Trading Nadex Binary Options & Spreads and Trading Nadex Binary Options: Keeping it Simple Strategies, provides more details on how your win/loss ratio affect your outcomes, helps you in understanding how to trade binary options and spreads, techniques for binary options trading and how you can overcome the typical obstacles that cause most traders to fail. You can order her books online by clicking here.