Contents:Binary options traders know that markets move like waves. A gradual and sustainable trend is always full of retracements, rebounds and whipsaws in the opposite direction, giving a chance for traders to use that advantage, finding entry points. Unilateral action is vulnerable to a complete reversal and even entire plunge, thus, we’d consider usual price action in this article. The toughest task for any analyst, including a technical one, is to determine the depth of a potential retracement and find the perfect moment to start the trading cycle. Even short-term periods of sustainable action could give significant profits in binary options trading.
MACD Pullback Binary Options Trading Strategy Overview
Every trading system must be simple to use, and reliable and the MACD indicator Pullback strategy is not an exception. Two well-known and straightforward technical indicators are used here. The primary one is popular trend tool - MACD - with default settings. The second instrument to monitor the price action is the exponential moving average with the period of 50 bars. Short-term traders, who prefer timeframes like 15-minutes and one-hour, would not like this system as it requires patience. The first chart to analyse is the four-hourly timeframe, while the daily cycle also works well. Any underlining asset could be chosen for the MACD Pullback Binary Options Trading Strategy as its both indicators are reliable for any asset class including currency pairs, commodities, shares, stock indices and even cryptocurrencies. The essential requirement is related to the trading volume as MACD does not include all of the price fluctuations for low-liquid assets trading in thin market conditions. Price gaps aren’t the best option in this case.
What is MACD Indicator
MACD, short for moving average convergence/divergence, is a trading indicator used in technical analysis of stock prices, created by Gerald Appel in the late 1970s. It is designed to reveal changes in the strength, direction, momentum, and duration of a trend in a stock's price.
The main idea of the price action is to catch a rebound of the price after an initial spike upside or plunge as the direction does not matter. MACD indicator perfectly shows the change in the trend’s momentum with its lines - MACD line and Signal line. The trigger is a crossover of those curves. Traders should pay attention to three critical stages before starting the cycle — first, MACD line breaks above/below the zero line during the initial action. Second, an opposite crossover occurs, pointing to the start of the rebound. Third, both MACD lines cross each other again, showing the continuation signal with the condition that the price should stay above the EMA50 for an uptrend and below the curve for a downtrend. We start opening deals on the third trigger.
If you like this strategy, you might also be interested in this Darvas box
Exit conditions are always different, and they depend on such factors as the volatility of an underlining asset, trend’s strength, fundamental elements and long-term trend direction. Risk management rules should be applied, as well. The primary approach is that grabbing several lucrative deals in comparatively short-term period is always an advantage rather than overtrading and having losses instead of gains. Therefore, too long cycles add risks. The most significant advantage of the MACD Pullback Trading Strategy is that it’s reliable and efficient. An example of the MACD trading strategy in action is shown on a four-hourly GBP/USD chart below.