Binary options price action strategies forex18 comments
About the binary options at optionbit
The setup of the trade is quite simple. A trader waits for the first 30 minutes of the regular trading session to pass then will try and trade a breakout of the range the futures establish during that time. After the first half hour of trading has passed a trader would then buy a move above that range and sell a move below that range.
A trader can also trade with the expectation that this range will not be broken. Since trader generally like to take more than 1 contract this can expose them to a lot of risk. If a trader tried to trade the setup using an index ETF like the SPY they will lose out on leverage and would need to commit a large amount of capital to the position. Luckily a trader can use binary options to replicate this trade with a much better risk vs. A trader is also given the ability to make money on no breakout of the range by selling binary options.
To set this trade up a trader would wait for a close of the five minute bar outside of this established range. To fade the movement a trader would tray and sell binary options outside of this range, expecting the futures to continue to trade inside of it. If a trade is slightly more bullish they could also buy an in the money binary option but would have to risk more in the position.
To replicate the breakout trade a trader would simply need to wait for the market to move above or below the established levels and then buy or sell the closest strike binary option they could. If the break is to the upside a trader would buy the binary that is closest to that strike as a move back into the range is unlikely.
If it breaks to the downside a trader would then sell the binary with a strike closest to that level. Binaries also allow a trader to bet that the market stays inside the range, something that is very difficult to do with underlying futures or stock. The versatility of binaries makes this trade setup even more powerful and accessible than any other product.
James Ramelli is an trader and options educator at AlphaShark Trading, where he actively trades futures, equity options, currency pairs and commodities. As one of the moderators of the Live Trading Room, Ramelli educates members on strategies, trade setups, and risk management while trading his own capital. Ramelli holds a B. The information contained above may have been prepared by independent third parties contracted by Nadex.
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