› End of Day Trading Strategy for Binary Options

End of Day Trading Strategy for Binary Options

Many binary options traders prefer focusing on long-term price action instead of monitoring short-term fluctuations with frequent entries. Some of them do not have enough time to trade on 1- or 4-hours charts, others are interested to hedge from medium-term risks. A trading approach to open deals with 24-hours expiration is called swing trading, and it does not require a detailed analysis of intraday charts as the main timeframe is daily in this case. Depending on the daily close rate, an underlying asset price might be easily predicted. This type of trading approach gave birth to the End-of-Day Binary Options Trading Strategy.

What is the End-of-Day Trading Strategy?

The American trading session ends at 5:00 PM New York time as most of the financial instruments switch dates on the daily timeframe at that time. That said, any asset price is considered as a close price for the previous day, and that parameter is crucial for the technical analysis based on binary options daily strategy.

What technical indicator is used in the system?

End of day binary options strategy uses the only technical tool to predict further trend’s direction - Bollinger Bands. That’s quite a simple indicator showing several parameters at a time. It has two price ranges separated by a middle line, while the upper and lower lines represent resistance and support curves respectively. The spread between those line widens when the market enters a volatile period, and tightens when the price swings calm down. Once a rate closes above the upper band, technical analysts point out a bullish breakout signal, while a close price below the bottom band signals a bearish breakthrough. A screenshot below shows how Bollinger Bands indicator looks like on GBP/USD daily chart.
End of Day Trading Strategy for Binary Options

What is an Inside Day trading signal?

As most of the technical indicator, Bollinger Bands has a lagging nature due to its mathematical formula. Thus, some of the trading signals might be false. In order to avoid fake signals and too many market noise, an additional confirmation function is used - an Inside Day pattern. An Inside Day pattern happens when a local peak or bottom was achieved with a breakthrough of the Bollinger Bands, while the next daily close rate is within the borders of the previous candlestick. Here are a couple of examples.
End of Day Trading Strategy for Binary Options
End of Day Trading Strategy for Binary Options

How does end of day system work?

Binary options traders know that the profit does not depend on the distance in pips, which an underlying asset moves within the expiration time. Thus, in order to increase chances for a profitable deal, traders should seek reversal points, when the market changes the trend’s direction. At the same time, such a technique allows maximizing profits and using so-called trading cycles when a rate moves in one direction for several days in a row. A higher likelihood of reversal usually happens together with the Inside Day pattern after reaching a top or bottom of the market. Here are several examples of end of day binary signals

Conditions to buy call options

  • A price reached a local bottom and breached the lower Bollinger Bands line;
  • The Inside Day pattern occurred;
  • Start buying call options on the next bar open;
  • Keep buying call options if the rate crosses the middle Bollinger Bands line;
  • Stop the trading cycle when the top of the range achieved or an opposite Inside Day pattern was charted.
End of Day Trading Strategy for Binary Options

Conditions to buy put options

  • Once an asset reaches a local peak and breached the upper Bollinger Bands line, traders should analyze the next day;
  • The Inside Day pattern occurred;
  • Start buying put options on the next day open;
  • Keep buying put options if the rate crosses the middle Bollinger Bands line;
  • Stop the trading cycle when the bottom of the range achieved or an opposite Inside Day pattern was charted.
End of Day Trading Strategy for Binary Options

End-of-Day system’s pros and cons

Pros

  • The trading system is simple-to-use and easy-to-understand
  • The strategy does not require too much time to analyze the market
  • Signals are rare but reliable
  • The reversal approach allows for maximizing potential profits

Cons

  • False signals might decrease the effectiveness
  • Additional filtering is needed to find the end of the trading cycle

Conclusions and Takeaways

The End-of-Day Trading Strategy is based on three simple factors to watch: end-of-day close rate, inside-day chart pattern and Bollinger Bands extreme values. The combination of three conditions at a time give an entry opportunity to start a trading cycle, which could last for several days in a row. However, the frequency of trading signals is low. On the other side, the system does not require too much time to analyze market conditions.


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