Contents:It’s not that hard to find an attractive entry point, even if you missed the whole start of a strong trend as sharp price actions are visible even without any technical indicator. Also, a dozen of the trading systems have tremendous technical indicators showing when a strong trend could occur, and where the price should go. But the biggest question comes when several profitable deals are already in the money, but traders want more. So when is the perfect moment to stop buying options in the same direction? Did the price reach its peak or should continue unilateral action?
Elliott Wave Oscillator
Ralph Nelson Elliott was the guy asking the same questions almost 100 years ago. He did not have any of the modern technical analysis tools, trading software or terminals with robot advisors, did he? Nothing. So he had to develop his own theory to explain the market’s action and prove that prices do not move in chaos. He managed to create a code of market laws, showing that financial markets are predictable. One of the most significant results of that theory is the creation of Elliott Wave Oscillator (EWO), which is the primary technical indicator in this binary options trading system.
He found that swings in mass psychology always showed up in the same recurring fractal patterns, of "waves" in financial markets.
Use a Combination of ADX indicator and DI
Since all of the mathematical formulas take into the account past performance, most of the technical indicators are lagging and EWO is not an exception. Therefore, technical analysts use a combination of several additional tools to avoid fake whipsaws and smooth signals coming from the primary indicator. In this case, we use Simple moving average with 9-bars period and ADX and DI indicator with default threshold (20) and 13-bars period. Timeframes start form 15-minutes, while best underlining asses are cross-rates among currency pairs. We took EUR/GBP as the most liquid and thus most predictable currency pair.
Conditions are simple and understandable. We start trading cycle after a series of signals from all three indicators. First, the price has to cross SMA9 from below (for call options) or from above (for put options). Second, EWO histogram has to start edging higher (call) or lower (put), while the best signal comes when it breaks the zero line. Third, ADX mainline has to edge higher (for both types), while -DI and +DI lines have to perform a crossover (+DI has to appear above -DI for call options, and inverse correlation is required for put options).
If you like this strategy, you might also be interested in this Positional Trading Strategy
Example of using Combination
An example below shows that one of the following conditions has to happen for us to signal that it’s time to grab the money and run away: current price crosses back SMA, or EWO histogram starts edging in the opposite direction, or ADX mainline shorts a local peak. Real Account holders could get additional details about how to benefit on the Elliott Wave plus ADX Indicator and MA Binary Options Trading Strategy.