Trading the AUDUSD using binary options allows you to limit risk while trying to capture a higher profit potential. In this video example, Gail Mercer is risking about $22 and manages to capture $63 (on a per contract basis). This provides a risk to reward ratio of $1 of risk for a gain of $2.86.
Trading the AUDUSD Using Binary Options Setup
On the 60-minute chart below, notice that price comes back to test the previous high at the ATR. As it comes back to test it, the Stochastics goes up but price doesn’t. This indicates that price needs to go down. This is also confirmed by the volume because buyers were decreasing on their approach to the ATR.
From experience, price needs to make a higher low (even though the Stochastics on the 240-minute chart is oversold). In other words, a failure of the test of the low needs to happen. Trading the AUDUSD using binary options allows traders to choose a short-term binary option with $22 or risk per contract. The expectation was simple — price would try to form a new low (more than likely it may fail) but either way there is sufficient room for the test to occur and is tradeable with the binary options.
As anticipated, price does move down and the profit target (set at $15) was achieved.
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