Binary Options Strategy: Following the Trend Strategy

This is the most popular among binary options trading strategies no-matter the expiry time frame. By following the current trend, traders are able to maximize their profit potential.

What means Following-The-Trend?

First of all, there is not just a single trend of a traded asset. At any given time, a financial asset is the subject of many different price trends. Each trend is deriving from the time horizon which a trader is using. Any different chart time frame produces a different trend. For example, the 1-minute chart may produce a very bullish trend while the 15-minutes chart to indicate a highly bearish trend.

Technical Analysis Tools to Identify the Trend

There are tens of popular technical analysis tools to identify and evaluate a market trend. The most common technical analysis tools are:

◘ Moving Averages

◘ The MACD

◘ Relative Strength Index (RSI)

◘ Parabolic SAR, and many more

Defining the Trend Visually from Chart

What defines an uptrend is that each high is higher than the previous high and each low is higher than the previous low. In the following chart, we may see an uptrend of the EURUSD (1-minute chart).

From the other hand, a downtrend occurs when each high is lower than the previous high and each low is lower than the previous low.

Using a Bar Chart to Define the Master Trend

Another way to identify visually the current trend is by measuring the green and the red bars. In the above 1-minute chart of EURUSD, we may see that when the closing quote of EURUSD is positive compared to the previous one, then the bar is colored green. Negative closings are indicated by red bars. By using a bar-chart we are able to identify an uptrend, a downtrend or a no-trend chart:

■ 3-4 consecutive green bars in a row are indicating an uptrend.

■ 3-4 consecutive red bars in a row are indicating a downtrend.

■ If red/green bars are not occurring in a certain row, that means no-trend and it is better to avoid trading

Using the follow-the-trend strategy a trader may execute orders in the same direction of the bar chart. If that trend is broken then the trader closes his position and waits for the next trend to occur.

Choosing the Ideal Trading Environment

The ‘Follow-the-Trend’ strategy is more valid when the market is liquid and most active in terms of volume activity. That means when trading Forex, for example, seeking to trade the Forex session overlaps. The ideal time to trade GBPUSD is between 8 AM and 12 PM EST when London and US markets are both active. During this overlap, traders are able to take advantage of tight spreads and high volatility while the trend is usually strong.

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