BINARY OPTION TRADING FOR FOREX TRADERS

The world of trading keeps evolving that opens the wide door and offers many financial markets to private investors. Forex has been being one of the favorites, whereas Binary Option, which is the derivate from Forex, is expected no less promisingly and profitably. Both come with their specific properties and benefits those satisfy various trading styles and expectations of investors. Some use Binary Option to leverage their position in Forex, while others employ it to hedge against the exposure, whereas the rest consider daily trading Binary Option as a solely income. It is up to you to pick your market, but please remember: you don’t need to abandon the current one to switch to the other. They can be effectively compensated due to their individual advantages. By reading this mini e-book, you will figure out how we possibly enhance the Forex position, limit the risk, or simply earn the rapid profit within 60 seconds - 60 minutes window times in whatever state of market, by trading Binary Option.

But first, we are going to understand the Binary Option market step by step, then examine the Cyber FX Binary Option platform inside out before placing any trade.

Second, you should already have a basic knowledge about Forex technical analysis, comprising chart patterns and indicators usage.

Last but not least, as a well-informed trader, you are fully aware of the risk that involved in trading. The market is not always anticipatable. Uncertainty must be dealt properly by strategy and discipline.

I. WHAT IS BINARY OPTION

Binary Option is the Over-The-Counter market which was derived from Forex, wherein financial instruments (currency pairs/ commodities/ indices) are traded in line with the prediction of future price upon a preset timeframe (termed as Expiry).

Like other markets, in which price difference counts, Binary Option offers two choices for trading decision: Up (aka Call), or Down (aka Put) from the point of entry (termed as Open price), towards two possible outcomes of price movement, which are higher, or lower when the Expiry times out.

Binary Option is also known as Digital Option, or All-or-Nothing Option.

The history of Binary Option

2007 Options Clearing Corporation proposes a rule change to allow Binary Options to be traded on major markets

2008

Securities and Exchange Commission endorses binary options, making it legal for US markets to list Binary Options as tradable live contracts

American Stock Exchange (AMEX) takes the lead, launching exchange-traded European Cash-Or-Nothing Binary Options, becoming the first exchange to publicly offer Binary Option contracts

The Chicago Board Options Exchange (CBOE) follows suit

2009 The beginning of the massive explosion in growth of Binary Options

Win (“In-The-Money”)

The trader is correct in prediction the price will rise at the Expiry

Lose (“Out-of-The-Money”)

The trader is incorrect in prediction the price will fall at the Expiry

If trader believes that price will move higher, he can place an Up option

If trader believes that price will move lower, he can place a Down option

Open Price

TELL ME MORE ABOUT THE BINARY OPTION TRADING CONCEPT…

Actually, both Forex and Binary Option traders look for the trading opportunities in the same way: they speculate on the difference of price of the asset(s) themselves.

If the price of an asset goes higher than Open price at Expiry, the trader who placed an Binary Up option wins the Payout – otherwise, he loses the Investment; and vice versa.

Technically speaking, you are trading Forex in Binary Option way.

So remember:

- There are 02 possible scenarios for price of an asset from the moment of Binary Option order is placed: moving higher, or lower.

- There are 02 possible options for Binary Option trading accordingly: Up, or Down.

(Nevertheless, occasionally the price would stay still, or return to exact level of Open price at Expiry, so the trade turns into a draw. This case rarely occurs, but we accept it as the nature of trading. We don’t lose anyway.)

SO THE PRICE’S DIFFERENCE IN THE FUTURE IS THE ONLY THING THAT WORTHY OF CONSIDERATION?

Correct, but not enough. The necessary condition is price moving in line with trader’s expectant direction, but the sufficient condition is price remaining its predominating level at the Expiry.

Let’s see example below. We are examining the EURJPY pair at M1 chart. Which direction do you predict the price to move, with the 15minutes Expiry, after the latest candle is printed at 137.670?

Hold on your answer for a while. We keep waiting out the next 15 minutes to get the final picture as follow:

If you have chosen “Up” option, you must win the Payout because the Expiry price (137.698) is higher than the Open price.

Otherwise, you must lose the Investment due to choosing “Down” option.

In Binary Option, the Expiry must be taken into account when as the price is moving within.

THE WAY OF TRADING LOOKS SIMPLE, BUT IS IT JUST LIKE BETTING FLIPPING A COIN?

No, absolutely not! Trading is not simple and gambling is not recommended. There are several proven strategies that can trade with Binary Option (e.g. reversal picking, momentum trading…)

THE PAYOUT AMOUNT DOESN’T DEPEND ON THE PRICE’S MOVEMENT (MAGNITUDE)?

Yes, despite how large the price moves, the Payout is pre-fixed according to your intended Investment, as long as the Expiry price is over-predominating than the Open price. So is the Loss, in case you wrongly picked the market direction.

DOES BINARY OPTION LINK TO FOREX MARKET, AND THEIR VOLUMES AFFECT EACH OTHER?

No. Binary Option is the private market, which orders flow is dealt separately.

OK, IT IS AN INTERESTING INDUSTRY… BUT WHAT ARE THE ADVANTAGES IN COMPARISON WITH FOREX?

1. Risk management: You always know the exact maximum gain or loss in advance. The trader controls the premium at risk to enter the Binary Option trade, and that is the only amount that can absolutely be lost. However, in Forex, even with a stop loss order set, you cannot be 100% certain that you will lose only the pre-calculated amount that you risked, or the stop loss will be hit precisely. While improbable, there’s always the chance that certain issues may affect your final max risk like slippage/ gap, due to spread widening or lack of liquidity to execute your stop order at the desired price.

2. Instant profit w/ Absolute return: In Forex, the further price travels in your predicted direction

from entry point, the more profitable you are. So you naturally expect a large movement which never been known how far it goes, or how long it last in ahead of time. And so often, you have witnessed the price strikes to gain a considerable amount of pips when London session opens, but suddenly reverts at New York’ and returns to breakeven (or even worse, hits your stop). In Binary Options trading, volatility is not an imperative matter to keep tracking on, as long as the Expiry is fixed by you (e.g. 60 seconds, 5 minutes, or 01 hour…). In other word, once the position is laid down and the trade is locked in, price fluctuation doesn’t count much, despite of single 1, or 100 pips movement, your Payout is absolute.

3. Trading error: The room for error when entering a trade is very limited in Binary Options. This

is due to the fact there are only two actions to take: Up, or Down. In Forex, an inattentive trader may mistype the stop loss level, or mistake dragging it on the chart, which potentially creating a loss greater than he intends.

TO SAY IN SUM, THE MAJOR DIFFERENCES BETWEEN BINARY OPTION AND FOREX ARE…?

Profit taking period: In Binary Option, your profit is realized right after the Expiry times out. It can be 01 minute/ 05 minutes/ 15 minutes/ 30 minutes or 60 minutes. So you don’t need to stick to the screen frequently managing your trade, and pray for the trend would last for several days long, as a Forex trader does.

Profit is foreseen: Profit in Forex, basically, is measured by the distance from the entry to the exit point. It can easily be calculated at hindsight but at the moment of entering, your expectably profit is unknown, as the price can revert at midway and never reach your target during its movement.

However, in Binary Option, your payout is settled.

Ideally, both in Binary Option and Forex, the faster and steadier price moves in your favorable direction, the better. But due to the ebb and flow nature of the market, you have no idea what would be the extreme point the price can hit, so “bracketing” the movement within a fixed duration might warrant a probable profit.

SO WHICH ONE IS BETTER? AND WHY DO I HAVE TO CONSIDER TRADING BINARY OPTION, WHEREAS I AM CURRENTLY TRADING FOREX?

Objectively speaking, each market has its own edges that designed for traders to employ at their own discretion.

The advantages of Binary Options traders are they don’t have to spend all their time and attention on keeping track of spreads, leverage, deposit margins, stop-loss strategies and interest rate differentials. Binary Options give traders back the power to focus solely on making correct predictions and, consequently, to enjoy making money at the free time. But since the Payout was pre-fixed, you don’t expect an exceed move can generate a highly desirable Risk/ Reward ratio on the trade as the Forex swing traders do. This ratio in Binary Option is called the Payout, which normally varies within 1/0.6x-0.8x, depend on each broker. On the other hand, some Forex traders realized that the irregularity in financial markets in recent years has led the idea of traditional speculative trading as far too risky and riddled with hidden complexities to consider. Old practice increased the margins of error and the frequency of costly mistakes. Therefore, they use Binary Option as the alternative way to trading, to hedge against the risk, cover the loss, and leverage the winning position in Forex market. So the choice is yours. But definitely you don’t need to quit one to trade the other. Both markets are trade-worthy equally.

DO I NEED TO BE A SEASONED FOREX TRADER BEFORE TRADING BINARY OPTION?

It is plus, but not a must. An experienced trader can apply multiple strategies based on Forex trading intellection. However, basic Binary Option trading method is not very complicated to learn in a short time.

II. HOW TO START WITH CYBER FX BINARY OPTION

First, you need to have the Cyber Binary Option MT4 platform running on your computer. Follow this quick link to learn how to install the platform: http://www.cyberffx.com/trading-platform/mt4-binary-option/

Second, you need to know how to place an order properly. Refer to this link to figure out more: http://www.cyberffx.com/trading-platform/mt4-binary-option/order-placing-manual.html

Don’t move on until you have examined well the technical side from platform’s operation.

ALRIGHT, I HAVE MY PLATFORM INSTALLED AND EXPERIENCED ITS FUNCTIONS. WHY SHOULD I TRADE WITH CYBER FX BINARY OPTION INSTEAD OF OTHER BROKERS?

1. Integrated & synchronized platform: With Cyber FX Binary Option, you can trade both Forex and Binary Option instruments on the same standard MT4 platform (while others offer web-based platform with basic line chart only, making you to employ another ordinary MT4 platform anyway), meaning you don’t have to switch back and forth to manage your Binary Option (and Forex) positions, which might cause complication and mistake (not to mention some web-browser might crash unexpectedly when being run for a long time as well).

2. One master trading account: Why you have to manage two separate trading accounts for

Forex and Binary Option, which causes lengthening the procedure in double and lessening your focus in half?

3. Multi-choices Expiry: The Expiry in Cyber FX Binary Option is available at 60 seconds/ 5 minutes/ 15 minutes/ 30 minutes/ 1 hour, which are perfectly matched for intraday traders.

4. Low spread – High payout: With Cyber FX Binary Option, 83% Payout quantity is fixed, while others let it floating between 65%-79% over the market’s sessions. Generally, the greater this figure is, the better returns on your investment are. In Forex, the spread for major pairs starts at 01 pip (plus commission free).

5. Accurate execution: By ECN mechanism operating on reliable server, every order of Forex and Binary Option that placed on the Cyber FX platform is fast and promptly executed, without any delay/ re-quote.

6. Simplicity with no restriction trading rule: You can apply any strategy according to your trading style. In Binary Option, you can immediately place an opposite order to the previous one without waiting for Expiry comes to its end (i.e. Up order placing right after Down order is filled), which in some case can correct/ compensate your previous mistaken position. This technic is called Buy back. (Some other brokers don’t allow it, making you sit on your hands and suffer an obvious loss.) In Forex, hedging and scalping are welcome at your own taste (so is the custom EA).

WHY 01 MINUTE/ 05 MINUTES/ 15 MINUTES/ 30 MINUTES & 01 HOUR EXPIRY IN CYBER FX BINARY OPTION?

Because, virtually, trading strategies which were designed to forecast the price movement in Forex are based on the respective available timeframes in MT4. If you are trading Forex on MT4, it is nonsense to offer 3 minutes, or 40 minutes Expiry in Binary Option.

SHOULD I TRADE BINARY OPTION WITH EXPIRY IN COINCIDENCE WITH RESPECTIVE TIMEFRAME ON MT4 PLATFORM?

Yes, you should. The fact is you will never know exactly where the price is going after several candles onwards (All is expectation). So if you are a scalper who often trade Forex off M5 timeframe, you should trade Binary Option at 05 minutes Expiry accordingly (the same applied for longer-term traders at M15/ M30/ H1).

CAN I PLACE A PENDING ORDER FOR BINARY OPTION INSTRUMENTS ON CYBER FX BINARY OPTION PLATFORM?

No. Actually, you cannot do it on other brokers’ platforms, neither. There is the only type as market order in Binary Option (instant execution).

AM I OFFERED ANY KIND OF LEVERAGE TRADING BINARY OPTION?

No. Because Binary Option is All-or-Nothing trading, therefore, you would earn your Payout, or lose your Investment as predetermined precisely.

In fact, there is no brokers offer leverage in Binary Option trading.

IS THERE OTHER MATTER AT THE TRADING SIDE THAT I HAVE TO CONSIDER?

There are two things you should keep in mind:

1. Timeframe: Unlike Forex, where a trader scans multiple timeframes to identify the prevailing trend (top-down approach) and zoom in to the fast one to open a position, basing on his evaluation toward the major market direction. In Binary Option, timeframe is not purely used for a trader to dig out the trend - but the setup, because the trade would be automatically liquidated at Expiry and profit is implicitly calculated basing on the difference between the Expiry price and the Open price. So, “buy & hold” strategy or “riding the trend until it bends” concept is less meaningful here. Instead, using your convenient timeframes to spot the setups from which there are the high possibilities of price will rise, or drop after one candle (bars) forward. Speaking in short, whatever timeframe you are at, just ask yourself: “What is the price level that the next candle will close? Would it be higher, or lower than the close of the current candle?” If you are in doubt of a premature setup, switch to the next timeframe to look for better confirmation. (Please don’t misinterpret that the major trend identification is not important. It might help us to predict the market’s reaction at critical points, but since your trade doesn’t last longer than 01 hour, drawing a weekly trend line is less relevant.) Not lesser to caution that, although Expiry in Cyber FX Binary Option ranges from 60 seconds to 60 minutes (in proportion to M1 – H1 on standard MT4 timeframe), but it doesn’t mean you have to trade off every single minute/ hour. The setup/ signal can appear in every timeframe, but it wouldn’t show up constantly candle after candle. High daily frequency trading can make you tired and cost you mistakes. So depend on your availability, let choose some times which suit you the most, keep calm and trade wisely.

2. Instrument: Cyber FX trading assets in Forex and Binary Option are identical. Likewise, the price movement of any instrument is the same in both markets (of course). So you can easily hunt for the setups in Binary Option while trading Forex, and vice versa. However, in reality, Cyber FX offers various financial assets (in both Forex and Binary Option) for traders discretion around the world, but it’s unreasonable if you trade everything tradable, because: a) it makes you overwhelmed; b) it causes you overtrade, which are equally bad. It is better to thoroughly understand just a few financial assets than to be a Jack of all and master of none. Don’t forget to check the correlation among currency pairs also.

III. THE BINARY OPTION STRATEGY

Since Binary Option refers to “Up”, or “Down” within a certain Expiry (which may consider the timeframe for the next candle to print), we focus on 02 strategies only:

1. The reversal picking: Finding out which condition that force the market will most likely to turn around in the next candle.

2. The momentum trading: Finding out which condition that force the market will most likely to keep moving higher/ lower in the following candle.

Unsurprisingly, Forex traders employ these strategies also, but they are not bounded at Expiry.

III.1 THE REVERSAL

The market moves in wave-like shape as its nature. Although a currency pair can intensively be bullish for over a month and move more than 1,000 pips, but when breaking down to H1/ M15 chart, we can always see the retracement against the major trend. In other word, there always are turning points somewhere.

While Forex traders must carefully consider countertrend trading, we as Binary Option traders, just care about the flash reversal, despite the trend would truly reverse or just provisionally retrace for a short time, 01 pip in 01 candle is enough.

This strategy will be used the most during our daily trading journey.

AGREE! HOW TO SPOT OUT REVERSAL/ TURNING POINT?

Nothing spots out reversal point better than the formation of candlesticks, which is the basic but indispensable indicator that every traders use. Let’s take a look at some typical formations below.

We will not dig in deeper the process and mechanism behind the forming of candlestick, since they were far invented ago and well described by numberless textbooks. What we look for just the setups on the chart that reveal high possibility of market reversal.

I SEE, BUT ONLY CANDLESTICKS?

Since they reflect the most recent movement and condition of the market (price action), we employ them as the leading indicator on our purpose.

In fact, there are numerous of experienced Forex traders who fully trust the candlesticks’ performance and trade on the naked chart only. Other technical indicators are considered lagging under their perspectives.

However, we respect the informative side of other technical indicators which few can be used under specific circumstances.

SO WHEN TO TRADE THE REVERSAL?

We prefer high volatility trading sessions (London open – London close), and enter the trade when the candlesticks formation has been formed completely, at the close of the last candle in the formation.

WHY THE CLOSE OF THE CANDLE MATTER?

Because in Forex market, most of traders often open their positions at the close of most recent candle, regardless it is a M1or H1, due to the reason of technical indicators that they are observing are normally calculated basing on the closing price of the candle (Moving average, Bollinger band, MACD, RSI…), therefore, when the pattern is formed completely, the trading signals usually are fired that adding fuel in the market and pushing price to move significantly.

This is considered important in Binary Option. Trading when candle is printing requires particular experience.

SO WE HAVE TO PAY ATTENTION TO ALL CANDLESTICKS FORMATIONS, WHICH ARE MANY?

Actually, there are rather more of candlestick formations that mentioned as reversal patterns. But as what we can see, they might be variants from the basic ones, or simply, are themselves at another timeframe perspective (e.g. Bearish Engulfing at M15 can be viewed as Hammer at M30, etc.).

As soon as you imagine how the formation alters under different timeframes, you will realize there are two shapes that are the most important to take note: Morning/ Evening Star, and Bullish/ Bearish Engulfing (aka Railroad Track).

HOW DO THEY LOOK LIKE ON THE REAL CHART?

The chart above was randomly picked, but the formations were easily spotted out.

IF THEY HAVE BEEN BEING LONG RECOGNIZED, DO THEY HAVE AN ULTIMATE POWER THAT PREDICTS THE MARKET MOVEMENT AT 100% CORRECTNESS?

No, absolutely not. Nothing warrants 100% winning rate in trading. The market can moves randomly and irregularly at a time, but we have the odds in our favor since these patterns were highly effectiveness proven under valid circumstances, repeatedly.

WHICH CIRCUMSTANCES THEY ARE MORE REALIABLE?

The market reverses for a reason. It can be due to fundamental impacted, supply/ demand off balanced, market sentiment changed, etc… Under technical analysis perspective, we localize the possible turning point and assess the reliability of the setup by letting the pattern fully formed, and consider other factors around that may lead the price to react from that point.

The most consideration-worthy is psychology support and resistance, where the price is most likely to bounce off when the reversal pattern is formed. Support and resistance come in multiform of horizontal/ diagonal line, channel, Fibonacci level, round number, even ADR (Average Daily Range) …

When the market condition is highly assessed to be reverse, we can confidently place a trade as what we aim to.

WHY AT SUPPORT AND RESISTANCE LEVEL?

Because they are the zones that Forex traders always look for to enter the market, likewise, to exit their positions at a favorable price. When market bounces off support, it indicates that the current price was accepted by the long holders, who willingly to buy and overpowered the sellers at that moment (which also means the short holders may reverse their positions, i.e. taking profit, in order to protect themselves against the market reversal).

Conversely, when market bounces off resistance, it indicates that the current price was accepted by the short holders, who willingly to sell and overpowered the buyers at that moment (which also means the long holders may reverse their positions, in order to protect themselves against the market reversal).

So in common perception, traders fully/ partially buy at support and sell at resistance. (Do otherwise might be inadvisable.)

When that situations happen, the candlesticks often form recognizable formations which easily to tell market reversal is imminent. Thus, it’s like a call of action that naturally pushes traders to open/ adjust their positions, making the market reacts and moves in predictable way within a couple of following candles.

And yes, price doesn’t always bounce off support/ resistance level as the breakout/ breakdown can occur due to participants’ interest. But it’s a different story and we don’t trade at support/ resistance unless the candlestick formation is confirmed, right?

OK, SHOW ME EXAMPLE OF REVERSAL AT SUPPORT/ RESISTANCE…

In this example of EURUSD at M15 timeframe, the blue horizontal zone was obviously the most recent resistance, where price reacted bouncing off it at the first touch and forming an Evening Star formation in the blue rectangle. Forex traders probably need to consider other factors to tell whether it would be a genuine bearish continuation signal to keep/ open a Sell short position, whereas a Binary Option trader assesses this is the high possible situation that price will drop further in the immediate candle due to the formation’s indicative reversal, so he decides to place a Down option at the close at the last bearish candle with 15 minutes Expiry, where the Open price (of the option) was 1.32655.

As you can see, the next candle closed at 1.32638, which was -1.7 pips difference. So he won this trade with the absolute return.

Please recall that Spread doesn’t exist in Binary Option, where just 1 pip differed warrants payout.

Also, supposedly that the Forex trader decided to go short basing on candlesticks formation reading, his stop would probably be hit shortly afterwards (the yellow area).

YOU MEAN CANDLESTICK FORMATION DOESN’T WORK AS IT IS SUPPOSED TO IN FOREX?

No, absolutely not. Candlesticks’ indication is powerful in Forex, but it’s just once piece of the whole puzzle, where others conditions need to be factored in (technical & fundamental driven).

HOW TO HEDGE THE POSITION USING BINARY OPTION?

So when the market comes out with uncertainty that limit your assessment like the example above, instead of risky going short with full commitment (trading lot), you can divide it into two, one for Forex Sell order, one for Binary Down option. Because basing on candlestick reversal signal, you expect the market to fall. Ideally, both positions would be profitable. But thinking in term of risk dispersion, you expect one may pay out, one may crash out that probably offset the risk and compensate the loss.

(Hedging is not solely supposed to mean you arbitrarily trade multi-positions with opposite biases, rather diversify them over multi-trading vehicles.)

That is the way we possibly deal with unexpected event for optimal result. You will never know what will happen in advance, so risk limitation is advisable.

** This example is not a mandatory trading method. You definitely don’t have to enter the market when in doubt, or just solely basing on candlesticks formation’s signal.

HOW TO LEVERAGE THE POSITION USING DUAL APPROACH?

Now you have understood the meaning of significant candlesticks formation and can easily spot them out on the chart. Here is GBPUSD pair at H1 timeframe example, and the Expiry is 01 hour accordingly.

1) Evening Star formation: After the bearish candle finishes printing, assuming that your own condition is met that highly expected a down trend continuation is underway. So you decide to place a Forex Sell order here, with Stop loss above the most recent high.

(You might also hedge the position by placing a Binary Down option at 1.69706, as what we have discussed previously.)

An hour later, your Sell trade is running in your favor. (And you are In-the-Money (ITM) when the Expiry price is 1.69511, which - 15.5 pips away from the Open price.)

2) Shooting Star/ Bearish Engulfing formation (shaped on higher timeframe - will be explained next): You trail your stop above the most recent resistance, and now your earlier Sell position has become a risk free trade. Then you place a Binary Down option at 1.69073.

You are ITM again, when the Expiry price is 1.68977, which - 9.6 pips away from the Open price.

Now you can draw the channel which was connected by the latest swing points and extend it to see price action at further contacts.

3) Tweezers Bottom/ Bullish Engulfing formation: You place a Binary Up option at 1.68760.

You are ITM again, when the Expiry price is 1.68824, which + 6.4 pips away from the Open price. Your Sell position is kept floating because it’s clueless to tell the down trend was exhausted.

4) Morning Star/ Bullish Engulfing formation: You place a Binary Up option at 1.68320.

You are ITM again, when the Expiry price is 1.68380, which + 6 pips away from the Open price.

5) Three Black Crows: You place a Binary Down option at 1.68671; also trail your stop above the most recent resistance which in coincidence with 50% Fib retracement level.

You are ITM again, when the Expiry price is 1.68585, which - 8.6 pips away from the Open price.

6) Three Black Crows: You place a Binary Down option at 1.68750.

You are ITM again, when the Expiry price is 1.68697, which - 5.3 pips away from the Open price.

At this point, you have won 06 trades in Binary Option and your Sell short position is still in the market with +70 pips gained. You also notice that the market was retracing for a while and turned into consolidation at the moment, but as long as a double tops pattern has formed, you retain the reason staying in the trade and expect the bearish continuation trending in the next days. As a swing trader, you go big, or don’t bother. Nonetheless, your profit was locked in anyway.

By this example, you may realize the power of using Binary Option to leverage the position in Forex, despite of trending or ranging market.

** It’s not necessary to enter the trade on both Forex and Binary Option at the same time. Depends on your trading style and risk appetite to select which setup in which market you prefer to trade the most, and whether should you cash in upon fresh setups appearing.

DO I NEED TO SCAN MUTIPLE TIMEFRAMES TO SPOT THE SETUP?

Naturally, the setups appear in every timeframe. However, as you have noted, candlestick patterns may vary from timeframe to timeframe which probably bring in the chart a new look. So you are free to scan multiple timeframes, if you wish to. But there is the rule of thumb that you only switch to the immediate higher, not lower one, to see whether there is a tradable setup that might doesn’t appear clearly in the current timeframe. If there is, trade on and stay still until the Expiry times out.

Simply explain, if you can check the chart every 15 minutes, so you can trade off M30 also, because it just lengthen the lower timeframe in double, which theirs ending time are overlapped twice a half an hour.

But by zooming in to M5, you are forcing yourself to spend more time checking in between more frequently than you have intended to, which is absolutely out of the initial plan.

Let’s look at an example of GBPUSD below:

At M15 timeframe, the cluster of candles which marked in purple rectangle don’t reveal much, do they? We acknowledge that the price was consolidated at the zone of most recent resistance in coincidence with the round number 1.66500, that may cause market bouncing off from, but the setup did not appear clearly at the current timeframe. If we let them be and keep waiting further, the market would move down rapidly without us, just not for long later. If we are stuck with minor details, just step back a bit and take an overview of the situation. Let’s see what M30 timeframe look like:

Now we have clearly seen that formation was Evening Star, so we can place a Down option with Expiry 30 minutes, when the bearish candle closes with Open price 1.66466, and bank in the profit when the price drops lower to 1.66403 at Expire as expected. This technic can be applied for Forex trader also, allowing him to spot the setup flexibly and enter the trade timely. ** The perfect candlesticks formation may take form at the higher timeframe, but basically, its initial structure is shaped orderly at the lower one and can be namable. The randomness-like formation in the example is often called “Cord of Wood”, which alters to Morning/ Evening Star formation at the higher timeframe. So base on your experience and perception time after time observing them, your eyes will be well trained and less and less you need not to switch through multiple timeframes so often, which might drive you crazy sometime.

** Once you have opened a position on the higher timeframe, don’t switch back to look for another trade, even if it is valid appealingly. Subordinate position (trade on trade) is ill advised that might causes you overtrade against the money management wise. You rather miss a trade than double the exposure.

SO WHICH TIMEFRAME IS THE BEST?

There is no way to tell which timeframe is better. Depending on how fast/ or slow his trading style is, the trader suits himself with the most comfortable timeframe/ Expiry that come along with his experience and skill.

BUT SOMETIME THE POTENTIAL FORMATION IS NOT PERFECTLY SHAPED AS DESCRIBED, MAKING ME CONFUSE MISSING A PROFITABLE TRADE, BUT ENTERING A LOSING ONE…

That’s true. Candlesticks formation is not always well-proportioned that may cause you mistaken. Let’s examine the chart below.

1) You have no idea that price will drop a few pips more at the arrow-pointed candle, since the formation doesn’t look like a Morning Star. So the Down option was passed, right?

However, this formation can be rendered differently in another timeframe perspective (as we already discussed):

Although this interpretation maybe counter-intuitive which a bit aggressive, but the setup is still valid. In this case, practically, the longer the wick of the Hammer candle, the stronger of bearish reversal signal it delivers. So, the price is expected to drop further more (not many of pip, but just enough).

2) You also consider this formation was a Morning Star when it bounce off the round number, and then took a losing trade at the arrow-pointed candle where the price dropped down instead of rose up as expect?

Well, the more distortional the patterns, the less reliable they are. (The first bearish candle shouldn’t have a long tail that exceeds the low of the middle candle.)

** Nothing is perfect. Even a perfectly looked formation can fail sometime. Remember, we trade on possibility, not certainty, so loss is a part of trading. However, thru observing/ experiencing some genuine and false setups, you will be able to filter them out at your own rule. Just don’t force the trade when it’s not there.

I WILL BE. BUT THERE MUST BE A GENERAL WARNING SIGN THAT PROBABLY FORESEES THE FAILURE OF A REVERSAL CANDLESTICK FORMATION?

Actually, it’s hard to get a “not-to-do” textbook on reversal candlesticks formation trading, but basing on experience watching them in particular cases, we might have a couple of rules which can be applied on. Let’s look at the example of EURUSD in M15 timeframe below.

1) It was supposed to be an Evening star formation when price bounced off the resistance/ round number above, but Down Binary option has turn out to be a losing trade. Why, because right afterward, it was blocked by the support below.

** Rule #1: You will not trade against the prominent support/ resistance since those levels have never been broken, while candlestick is confronting them. How close to the support/ resistance that factored in restriction? Practically for Binary Option, when less than 05 pips it is considered risky to trade toward them.

2) There was an appealing bullish Engulfing formation rejecting the support/ round number below while it was 10 pips away from the resistance, but the Up Binary option didn’t win. The reason we might take is the oversize candle that often cause the price to reverse at the immediate candle.

(Speaking about this case, just image the market has a lung that once it breaths out too far, it must takes a light pause to breath in first.)

** Rule #2: You do not trade on oversize candles. How tall is the candle which considered oversize? Well, generally, greater than 15 pips for major USD pairs, or +20 pips for cross JPY pairs would be. You take it for your own judgment.

3) Another bearish Engulfing formation formed at resistance/ round number, but eventually we fell if the Down Binary option was placed, although the size of the candle was less than15 pips. This due to a fact that the market in the first 15 minutes from the time sessions cross over often moves in either quiet or chaos (New York and London sessions overlapped duration was painted in Brown).

** Rule #3: You should not trade at the first 15 minutes when new session opens.

4) No, there wasn’t any setup there. But you should be noticed about the candle that printed at the time that the news was released. The market often react weirdly right before, and after that moment.

** Rule #4: You may not want to trade the news.

I OFTEN SEE THE PRICE DOESN’T ALWAYS BOUNCE OFF THE SUPPORT/ RESISTANCE RIGHT TO THE PIP, OR SUDDENLY REVERSE IN THE MIDDLE OF NOWHERE, ARE THE CANDLESTICK FORMATIONS FROM THOSE SITUATIONS ACCOUNTABE?

Although we often position and draw support/ resistance as the horizontal lines on chart, but actually they are better defined by zone, which may fill out a number of pips from the exact point we may see initially.

This due to the fact that zone is just a psychological level, where the technical-school traders keep hunting on for the bargain price speculating the market. They may hold by, or give up their positions without early notice; or simply wait n’ see before jumping in trading that put the market in standby mode temporarily, so that lack of commitment which is steam to move the price (and validate the pattern itself).

Moreover, the Top Dog (aka Market Maker) often push price up and down around the support/ resistance level, where traders place their stop loss/ pending orders, to trap their volumes, shake them out, clear the book before driving the price in their purposive direction.

Due to this intention, false breakout/ breakdown often occurs that leave reversal points off the lines, even at no man’s land.

Therefore, don’t expect the price will bounce off exactly to the pip from where you think it should be, although it would sometime. And yes, those candlestick formations are telling.

(Don’t mistake the Market Maker, the dealer who offers the contracts liquidity to retail market, with market-maker function of a Dealing Desk broker. It’s totally different. Brokers don’t have the power and resource to move the multi-trillion dollars market just to hunt for your stops. Mind you!)

WHAT DO YOU MEAN BY THAT? AND WHAT I HAVE TO DO WITH IT?

Let’s look at the M15 chart below and see how often it occurs.

The green rectangles indicate the Asian trading sessions (accumulation phases), which are the durations we pay least attention to, due to light trading volume offering poor setups. The extended red lines are psychological supports and resistances for intraday traders, who usually jump in the trade when these lines are broken and place their stops at the other side (or more tightly at middle of the range).

Examine and learn it yourself. Have you noticed every time traders follow the breakouts and create their own demises, and how many times they think the trend will continue but it finally reverses?

Don’t be surprised that behavior can be found at every market, on every instrument.

** Market manipulation is a broad topic that is beyond the scope of this material. You may, or may not agree with the statement and consider a false move is nothing out but a random move. It’s fine, as long as we accept the noise as a nature course of trading. The most concern-worthy is how to profit from it, correct?

SHOW ME HOW TO TRADE OUT THE TOUCH MARKET?

During those trading days, Forex traders might suffer serial losses due to the arguable artificial moves make the market choppy around (which is a margin killer as you can see). But accepting the fact that the market is impossible to anticipate and it can be ranging almost of time, so we apply the proper strategy with Binary Option to hedge/ leverage the Forex position as we should do.

Let’s go all through one day for example and see how it works out, using M15 as a default timeframe. Then you may apply it when experiencing the similar situations.

The previous day was in a ranging movement, with the open and close prices are not much different. So the immediate trend is not clearly identified for today bias.

Right after the Euro session open, a Bullish Engulfing formation was formed, but it should be ignored because we don’t want to trade against the resistance above.

Not for long later, we see the other bullish candle breaks out the Asian range that might triggers a number of Buy stop orders from carelessly traders, but we are caution of the false moves and don’t jump in the initial breakout, rather wait for further indication.

The candle right next to it suddenly reverses and turns into a bearish one, which formed as a Bearish Engulfing formation. At this moment, we may take it for a false move (who dare to sell aggressively on the breakout?), but we are unsure that the market will truly turn into bearish mode to place a Sell order. However, based on what the formation suggests at resistance level, we place a Down Binary option at the close of the latest candle with 15 minutes Expiry, with expectation that the following candle will also be the bearish one.

The result after 15 minutes:

We were unsuccessful with this trade, since the Expiry price was slightly higher than the Open price. But we don’t bleed out to death just because of one losing trade, right? Let’s move on and hunt for another setup.

15 minutes later, another bearish candle was printed.

Now it looks like an A shape which often create a long wick of a candle at higher timeframe, let’s switch forth to find out better.

Does it remind you something?

Here is the suggestion in M30, an Inverted Hammer (Shooting Star), which is a Bearish signal. We are still unsure that the false move will drop the price straight away and turn the market into downtrend, so we just place a second Down Binary option at 30 minutes Expiry based on candlesticks’ indication presently.

Yes, we are ITM after 30 minutes and no, this is not an avenging trade. Now switch back to M15 timeframe and keep looking for another setup.

Here is what we get, an Evening Star formation bouncing off an inner descending trend line that fired the bearish signal. We can’t go short since the price is approaching closer the support from Asian box for unknown reason. Instead, we place a Down Binary Option with 15 minutes Expiry, since 7 pips away the support leaves enough room for an ordinary candle to print without a sudden rejection.

We are ITM again; though the Expiry price was just a couple of pips lower the Open price.

After witnessing that price came down exceeding the support level, tapped it twice, but suddenly reversed and closed above, we may be pretty sure that the stop loss orders of traders who jumped in the initial breakout have been removed, and other Sell stop orders now might have been activated as well. The second Hammer candle also breaks the descending trend line and close above it, forming a Tweezers Bottom formation rejecting the support from Asian box (which coincidence with round number) that strongly indicates the reversal signal. For now we can assume that after the false move is done, the “real” one takes place. However, we can never know if there would be another purposeful move to the downside again that might hit our stops when we go long, if we place it tight right below the Asian box.

So, play it conservatively, we divide the trading commitment size into two: half for Buy order whose stop loss is below a few pips from yesterday’s low (20 pips away from round number), and half for Up option with 15 minutes Expiry, which the possibility of grabbing instant profit due to this signal is higher.

Yeap, we won this Up Binary option as expected. Now London comes to noon and New York session is about to open. We’re gonna to take a break as well.

** False moves are often found at London and New York sessions open, which might trap the volume of intraday traders and hunt their stops down (for counterparty benefit) in a short cycle. Although these shady moves don’t show up every day (as they need to be hidden) and not easy to be unmasked, but carefully tracking the market footprint and applying trading vehicles properly, you might be out of margin trouble. And remember, you don’t fight against the trend, but sometime, you must trade against the herd.

The New York session right before the news released:

Although the price has appreciated as we expect this far but when the Core Durable Goods Order report is coming, nothing can be guaranteed that we can retain the trade in our favor. The news, due to its nature, is virtually unpredictable beforehand. What we can foresee is it often comes out with high volatility that promisingly offers great reward, along with the risk incident to it is huge also. In fact, you are advised not to open a position, or close yours remaining one, before the news is released.

Well, advisably, you should do that.

But what if you think you don’t want to leave the game early, when your position has been opened just not for long and didn’t earn many of pips, whereas the news releases come out almost every day, anyway?!

Carelessly, you trail your stop to breakeven and let it be. The worst thing is you can gain nothing from your trade.

Aggressively, you consider this news is high impacted but one way driven, which means it often moves the market in one direction as soon as it’s released without both sides knee-jerking as NFP, Bank rate or FOMC statement does. (Experience and skill required.)

So first, you remain your bullish bias and trail your stop loss (SL) to 5 pips (minus spread) below the immediate the round number 1.36000, which was 20 pips away from the current price, to tighten the risk also to leave enough air for price to breathe when the data is publicized. You will not want to risk more than that. Moreover, you get back up from other scalpers who miss the first train wanting to jump in the market at a good price, by placing their buy limit orders at the most recent support zone (/round number) in case the price drops so they can buy the dip and quickly get out with a few pips gained. Thus you can expect the support is strong enough that cause the price to bounce off and your SL wouldn’t be hit right away.

Second, you determine your maximum profit you can get in case the price shoots up due to the supportive data from the news (if you wish to cash out your position shortly). It’s not so hard to judge, you may expect the upper round number 1.36500 - 5 pips should be your take profit (TP) target when the price goes up, which around 50 pips away from the current Low of the day and that is a reasonable distance to fit in the pair’s ADR.

Now you can assess that the Risk/ Reward ratio of the trade is 1:4.

Ideally, the market should be driven upward and fulfill your TP target without challenging your SL. But what if it should not?

You place a Binary option order that opposite to the direction you expect the market to move with the Investment is double the SL (in cash) (= trading volume x number of pip x pip value).

In this case, you place a Down option against your bullish bias with the Investment is 2 (in comparison with SL as 1). Why?

Simply because you don’t know which way it is going to move in advance, right? So you use your “Binary mind” to hedge the remaining position using dual approach as following scenarios:

#1 (The craziest expected): The price straight away shoots for your target, fills your TP order, and then suddenly reverses and closes below the Open price.

No. It’s not going to happen today. Be practical!

#2 (The most expected): The price strikes up to your target and remain its bullish momentum, with Expiry price above the Open price.

You have taken profit (4), but lost the Binary Down option (2) which is okay. Your P/L is 2 with net return = 2.

#3 (The less expected): The price strikes down towards your SL level, with Expiry price below the Open price.

At the moment, you win the Binary Down option but suffer a drawdown on current Buy order. Since the market was impacted by negative figure from the news, your SL might be challenged later on. There is not much you can do but wait and see whether the support would hold the price, or you must close your position early. Preferably, it holds. But even if it doesn’t, the risk was offset due to the P/L is 2 and net return = 1.

#4 (The least expected): The price strike down to hit your SL level, then suddenly reverses and closes above the Open price.

This possibility is rare (as scenario #1), but it can happen anyway. So your both positions would be wiped out. If you scare of it, you better don’t be aggressive.

Now let’s plan for that…

… And see how it is going…

The situation turns to be scenario #2, which we expect the most. Although the Down option lost, but we accept that according to our hedging purpose and earn 40 pips from a Buy trade, so the return is positive.

** This is an ideal example wherein favorable trading conditions are met. The market will not behave alike all the time; therefore, the context would vary on the theme. Trading the news might be risky that requires experience-intensive and strictly money management skill.

When no more news is going to be released, the market slowly backs to normal. Since the daily range has been reached, it becomes more quite that Forex traders are less likely to find an opportunity to trade. Considering the positive profit that has been gained, we might take a day off for now. However, if spending more time trading Binary Option until London close, we can have a few more setups that increase today earning, while a countertrend trade didn’t always a return lot of pip.

You also can name them on the chart yourself.

I ACKNOWLEDGE THOSE POINTS, BUT IF IT’S SO, THE BREAKOUT TRADES DON’T WORK OUT?

No, it doesn’t mean that way. Price will not stay within the box forever and breakout will occur, sooner or later. However, more often than not, you might be misled by the initial false moves that screw the money out of your account faster than when you can take it back. So they should be factored in your risk management strategy worthily.

Considering that a false signal is a signal, you trade out the false breakout before the real one takes place (the example above).

Sound aggressively, like top and bottom fishing?

The true is everyday there is a top and bottom, and your job as a trader is buy low and sell high, at wherever areas they may called.

Moreover, you can always use Binary Option to hedge/ leverage the position in Forex, as the beauty of function it was created for.

** And you will not test the depth of the river by both feet. Whatever risk amount you think you can take (e.g. 5% as normally recommended), let reduce it in half, for both Forex and Binary Option. The market can be traded every day, but you will not be rich overnight. Stay calm, improve skill, and release stress. Play it safe aggressively!

BUT THE FALSE MOVE DOES NOT SHOW UP EVERDAY. HOW TO TRADE THE BREAKOUT PROPERLY WHEN IT OCCURS? Yes, indeed. The false moves can be considered as the gift sometime but in reality, they won’t appear everyday as the true breakouts will take place, with or without them. But we don’t have to come back home with empty hands. The reliable breakouts that often come from (actually, is a part of) a momentum trading which is validated by pattern’s confirmation as described as the Breakout – Pullback - Continuation in an example below:

If you see the reversal formation at support, nothing can stop you from betting Up in Binary Option.

Conservatively, Forex trader can go long when price has closed exceeding a few pips from the most recent high, with stop placed below the candle that challenges the support.

Look at the next day, when there is no confirmed pattern, you don’t have to trade the breakout at all (as it never was there, except the false move offered you a couple of “bumping trades” inside the box).

But if they are there, trade on:

** Trading the break in Forex may require a broader view and an overall strategy applied upon the current market’s situation. But most often, after breaking down the zone, price will pull back to the former support that now has become the new resistance, which commonly named as a “retest” the level of price. It’s nothing out but an ordinary minor retracement, but if traders believe that resistance would probably hold hardy, they keep selling rally that cause a re-bounce, thus, a downtrend continuation. (Vice versa for the breakout.) Since this behavior has become a self-fulfillment event, we naturally live with and take advantage on it.

So you skip the first push outside the consolidation, wait briefly until the price to pull back and look for reversal signal at support/ resistance that is indicative the continuation possibility of the following move momentarily. Technically, you trade the breakout by… reversal picking. (This type of setup is can be named as “reversal - continuation”, that often precedes the momentum signal because it tends to push price to move further since the breakout has occurred.)

With Forex traders, the reward for this patience is to keep us out of false breaks in most cases, which may arouse our greed and fear making us blindly marry to the bad trade, or eager to revenge trade after trade badly.

BUT SOMETIME THE BREAKOUT - PULLBACK - CONTINUATION PATTERN IS UNSEEN CLEARLY, OR PRICE KEEPS “TESTING” THE LEVEL SEVERSAL TIMES. WHAT SHOULD I DO IN THESE CASES? Agreed! Sometime the market is seemingly moving in the noise making us dancing in the dark confusingly. But, from the experience on candlesticks’ indications reading we’ve learned so far, every opportunity should be scanned and judged fairly and flexibly. Let’s see an example of GBPUSD at M15 timeframe below.

In reality, it’s impossible for us to trade around the clock, so assumingly we are only available in London open – London close period, when the market is active the most offering high quality setups. For our better visualization, the Tokyo session is painted in Green, where we start outside, and the late London’ and New York sessions overlapped is painted in Brown, where we stop inside.

1-2: Although the Breakout – Pullback – Continuation pattern was not depicted clearly, but before those two bearish Hammer candles finished printing, the price has retraced to, and rejected from the resistance level twice (the former support before broken) (you definitely witnessed it at live market). Therefore, though we don’t expect the possibility of downtrend continuation would truly happen but based on their bearish signals, Down Binary options were placed with the Expiry at the immediate candles close.

These trades were ITM and considered to be aggressive. Besides, there was no breakdown short, since the Breakout – Pullback – Continuation pattern has never formed at the downside.

3: Although the resistance has been broken, but it might still challenge the Morning star formation when price was pulled back too deep that formed within the Asian box. However, considering the bullish signal at the inner ascending trend line, Up Binary option was placed accordingly.

This trade was ITM and considered to be aggressive. However, we miss the breakout long since the Breakout – Pullback – Continuation pattern was unseen obviously (but it was late when London was about to close anyway).

4-5-6-7: These trades were ITM and considered to be conservative when price bounced off from the support (former resistance before broken) and travelled in coincidence with inner ascending trend line’s progress.

We were in the breakout long trade when the Breakout – Pullback – Continuation pattern has taken place.

8: The price has dropped after the news was released, but as a bullish Engulfing formation was formed at the level which might remain the short memory of a former resistance, we can place Up Binary option here.

This trade was ITM, however, aggressively.

The breakout long trade we were in earlier probably turned into an unprofitable trade, if we have not closed before the news was released, or at the moment the previous inner ascending trend line was broken with a small loss.

** There is no black and white in trading’s world, rather grey and blur, as you don’t have to wait for the Breakout – Pullback – Continuation pattern to place Up Binary option outside the box (and vice versa), or hold yourself from using Binary Option to hedge/ compensate the floating position in Forex. Depends on how conservative/ aggressive your trading style is that the method should be committable upon your taste. Of course, following the rule that sometime lead us to nowhere, or cause us missing a straight away break that occurs without a pullback. But it’s better than being trapped and shaken out in an old practice placing “lazy” pending orders around the box, or rushing to jumping in the first candle that breaks. Nonetheless, if you have found a better method to trade the breakout, please feel free to trade it your own way.

LASTLY, I’VE HEARD THAT MOVING AVERAGE LINE IS ALSO CONSIDERED A DYNAMIC SUPPORT/ RESISTANCE. DOES IT COUNT? Actually, it does somehow. Beside the static support/ resistance which can be drawn manually by horizontal/ diagonal line on the chart, there are moving lines as the moving average indicators that in some cases are considered as the dynamic support/ resistance that cause the price to bounce off at contact. These moving averages normally are used to define the trend which involve in momentum trading strategy, but due to their multipurpose utilization, they can be dealt in reversal picking strategy also.

However, due to its “dynamic” nature, the perception on it might be subjective and impulsive. So traders experience it advised.

Let’s go through by an example of EURJPY at M15 timeframe with a series of Exponential Moving Averages (EMA) below.

We have noticed that the reversal formations can be found at the confluence of price with the 15/50 EMA, where price rejects and closes below the 5 EMA as the extra confirmation of bearish reversal signals that can be traded accordingly with Binary Option. These setups should be considered as the reversal – continuation ones.

However, once again, don’t expect to see the price bounces exactly to the pip when the reversal befalls. It’s better to consider the air buffers between the 5 with the 15 EMA, and the 15 with the 50 EMA as the dynamic strips of support/ resistance.

** Although being in trending mode but the price will not keep rising/ falling for the whole day without a look back. Sooner or later, it would slow down and catch up with a (x) EMA, which is the natural regression phenomenon after (x) candles of movement in the current timeframe, while the market is still expected to remain its strength in the current bias.

Besides, there is not much different between the 13 with 15 EMA, or the 53 with 50 EMA, in speaking about their movement. But somehow, Moving Averages with noticeable numbers are factored in the trading system of majority of traders who consider their contact with price as the point to buy dip/ sell rally, so naturally, they will act like the “dynamic” support/ resistance that causes price to bounce off and continue to travel in line with the previous movement. Nevertheless, this knee-jerk reaction might not happen promptly due to the discretion of EMA Period setting among the interest group of traders (even it wouldn’t happen at all, either).

This is not the rule, rather again, a self-fulfillment event, but highly subjectively. Therefore, they should be confirmed by additional indicators’ agreement before entering the trade (which is also mentioned in the next strategy).

III.2 THE MOMENTUM

Out of state of consolidation, the market can be trending healthily that offer Forex traders many of pip. However, with the max Expiry was set at 01 hour in Binary Option, we don’t take that trend riding is the key to profit by. Instead, we just care about whether the momentum within the immediate candles remains its strength to push the price in current direction or not. (Again, we don’t ask for a hundred-pips-home-run candle, but more than 1 is enough.)

However, the way we approach to momentum trading is a bit different with the reversals picking. In this strategy, we are going to employ a couple of technical indicators that confirm the market’s momentum before we enter the trade, because as matter of fact, candlestick’s indication works best in the reversal, but tells less in momentum continuation. Thus, each strategy need to be applied its own tactic for the optimal result.

Confused? Don’t be. You cannot surf the desert by a yacht, or drift the coast by an ORV, can you?

MEANING US COMPLETELY TRADING THE MOMENTUM WITHOUT CANDLESTICK’S INDICATION?

Not really. Candlestick plays an important role in momentum trading as the entry signal as well, but it must come in conjunction with other indicators’ confirmations (which might be called our trading system). Besides, we focus on the single one, instead of a formation of them, with restriction and rules applied on. ** As mentioned earlier, a reversal - continuation pattern is often followed by a momentum setup (as a trend continuation). You need to distinguish between them particularly from now.

OKAY, BUT WHAT ARE THE RESTRICITION AND RULES FOR CANDLESTICKS?

Particularly, the bullish candle (which implies the appreciation possibility of price within the next candles) is considered a signal for Buy long/ Up Binary option entry, whereas the bearish one (which implies the depreciation possibility of price within the next candles) is considered a signal for Sell short/ Down Binary option entry.

However, don’t mistake the bullish candle with buyer candle (wherein the Close price is purely higher than the Open price), and the bearish candle with seller candle (wherein the Close price is purely lower than the Open price). These mistaken entities are also the restriction.

How they look like? See illustrations below for better definition.

You don’t want these types of shaky/ indecision/deniable candles to be the Buy long/ Up Binary option entry signals:

But you look for these (handsome Hammer & Shaven candle, ideally):

Likewise, you also don’t want these types of weak telling candles to be neither an entry signal for the Sell short nor Down Binary option:

Rather they should look like these (pretty Inverted Hammer & Shaven candle, ideally):

Beside, here are a few points that remind you about the candlesticks’ trading rules, which should not be violated in all cases of trading: Rule #1:

You don’t enter at the first bullish/ bearish candle that breakout/ breakdown, even though it looks valid appealingly (especially an oversize shaven candle).

** You definitely can trade the breakout by Breakout – Pullback – Continuation pattern, but not at the first candle that breaks to avoid a doubtful move that may cause a sudden reverse.

** Yet notably, a fast move printing a shaven candle whose body is taller than 15-20 pips (as we’ve noticed in Reversal picking strategy) should be considered an abnormal one, which less likely to push the price to move any further in the immediate candle. Thus, although it might still be called the “momentum candle”, but you better beware of its size when trading Binary Option.

Rule #2:

You will not trade against the support/ resistance (that probably cause a re-bounce as we’ve known well).

Additionally, open a trade beyond the limit of the pair’s ADR is inadvisable.

** You better wait for price to breakout/ breakdown and candlesticks well close staying above/ below those levels, then look for upcoming setups with further indications.

Rule #3:

You don’t look for a momentum setup right before, and after the news is released.

** The news is unpredictable, so is the momentum it begets. Although a high impact news can move the market heavily in several candles, but it’s the news by its very nature that be incontrollable, isn’t it? (While hedging using Binary Option is a different story.)

Surely, we don’t enter the market after every bullish/ bearish candle is printed, because they would not only make us overwhelmed, but also down the drain our effort due to horrible Win/ Loss ratio

daily records. Therefore, momentum signals must involve the system’s agreement for better confirmation.

OK, NOW TELL ME ABOUT THE SYSTEM.

A system, which is the trading method made up from a series (/combination) of technical indicators, is practically applied by historical experiment upon the signals it produced. Since there are numerous indicators that available (both default and exotic), it would be difficult to analyze the situation if we attempt to put too many of them on the chart. Therefore, only proper ones should be chosen selectively:

1. Exponential Moving Average (EMA) 2. Average Directional Movement Index (ADX) 3. Accelerator Oscillator (AC)

** Certainly, there is no such thing that claimed as the Holy Grail that make you win all the time, as indicators always lag behind price that might generate an outdated signal or disregard an early setup in some cases. But it’s better than to trade blindly facing countless errors, right? So we don’t expect a indicator that lead, rather confirm the entry/ filter the noise at the moment of decision making. By the mutual agreement from functional indicators above, the possibility of winning trades is increased. However, occasionally, their indications may be conflictive with the other under uncommon circumstances, that negate the opportunity and cause us dismiss the trade. It’s few and far between and should be accepted, since the pros of this approaching is to limit poor quality setups that keeps us at the safe side more often. Finally, there is no magic about indicators picking and parameters setting. Every indicator was designed for a purpose and the system which contain them technically performs basing on the back-testing examination. Nevertheless, things evolve, and the past performance is not supposed to be indicative the future result. If you disagree with these ideas, you must know something better.

JUST KEEP MOVING. HOW TO START WITH MOVING AVERAGES?

Back to the series of 5/15/50 EMAs we have discussed previously that now have been applied on the chart of EURJPY at M15 timeframe for our examination. These EMAs will be used for trend identification and reversal - continuation setups recognition.

As we have noticed, once the 5 EMA crossed over the 15 and 50 EMA in turn - from above and if there was a bearish candle close below them, the market tended to accelerate in the bearish momentum because of sell orders flow’s predomination (as it starts the bias in Downtrend) that often pushes price to lower within the following candle due to the momentum acceleration.

However, not for long later, price pulled back to the dynamic resistance (as mentioned as the air buffer between the 5/15/50 EMAs) before bouncing off and continued to move downward when the momentum was recovered (which often generate the reversal - continuation setups at confluences as explained earlier).

Conversely, in the Uptrend, those EMAs would switch their orders and reflected the opposite situation.

Furthermore, we also acknowledge that the wider the EMAs separate away, the higher possibility that the price will retrace (just recall the example when the market breaths out – breath in).

EMAs trading rule #1:

You keep placing a Down Binary option if there is the valid bearish candle closes below the 5/15/50 EMAs in regular order, with Expiry at the immediate candle’s close.

** Vice versa for Up Binary option placing.

EMAs trading rule #2:

Generally, you should not enter the market when the 5 EMA is 20 pips away from the 50 EMA (on JPY cross pairs) (or 15 pips distance on major pairs – you better specify yourself).

(You prefer to trade with the “adult” momentum from where it begins, rather than an over-mature one that might cause the price retrace unexpectedly.)

There were totally 14 momentum candles that pass the restriction and qualify the rules of candlestick and EMAs (which were numbered on the example chart), wherein 8 won (marked by Blue “V”) and 6 lost (marked by Red “X”), that resulted the Win/ Loss ratio to 8/6 within 02 trading days.

Although the record produced from candlesticks and EMAs’ signals was positive, but not as good as we expected that might require an extra confirmation from the ADX indicator.

** There is no mystery on EMAs setting. When the price is above the (x) EMA, it indicates nothing but says the recent price is being higher than the averaging price within the period of (x) candles in the current timeframe. Likewise, when the Fast (a) EMA crosses above the Slow (b) EMA, the asset is considered has been being rapidly traded in bullish mode, within the period of (b) candles in the current timeframe. So speaking in cause and effect, the market is expected to keep continuingly moving higher.

However, those events don’t necessarily imply that the breakout must come in line with EMAs’ direction, as the market will suddenly turn over (often seen in a false move) and EMAs will mirror themselves contrarily.

5, 15 & 50 Period of EMAs was physically set by back testing process which delivered an acceptable performance in the complete trading system. However, the setting can be adjusted according to individual assessment and experience upon his favorite timeframe.

OK. HOW TO GET AN EXTRA CONFIRMATION FROM ADX?

Now we apply the ADX indicator with Period 5 (Grey moving line), with Level 20 and 70 on the chart.

ADX was designed to measure the healthiness of the trend, whereas +DI (Positive Directional Movement Index) (Green moving line) indicates the bullish movement and –DI (Negative Directional Movement Index) (Red moving line) indicates the bearish one. Notably, ADX is non-directional and both +DI/–DI move upward to indicate the Uptrend/ Downtrend acceleration.

Technically, both ADX and +DI lines confirm the provisional bullish momentum when they cross above the 20 level, and similarly with the bearish momentum when ADX and –DI lines also cross above the 20 level, while ADX line itself crosses the 70 level indicating that the trend has been developed too fast and too far without a natural “breath in” (therefore, you should be watchful on that).

(However, at the day that there is a news release, level 70 is less meaningful.)

Don’t equate the ADX 70 level with overbought territory of Stochastic, or RSI. It’s obviously not.

As far as we can see, almost the bearish signals generated from candlestick and EMAs’ trading rules were confirmed by the ADX indicator when both ADX and –DI lines were rising above the 20 level, except the setup #3 and #7. So we can eliminate those two poor setups from by ADX reading.

Likewise, most of the bullish signals were confirmed when both ADX and +DI lines were rising above the 20 level. But, this time setup #10 was dismissed due to +DI was below the 20 level. So a profitable trade was negated regrettably.

However, the losing trade #8 would be prevented, if we followed the ADX line’s warning when it crosses the 70 level.

ADX trading rule #1:

You only qualify the Down Binary trade from candlestick and EMAs’ restriction and rules of Down Binary setups, if ADX and –DI lines read above the 20 level.

** Vice versa for Up Binary setups.

ADX trading rule #2:

You would consider carefully if the ADX line is about to touch the 70 level.

So now we would have 10 trades according to the current restriction and rules of candlestick and EMAs + ADX indicators, wherein 07 won - 03 lost, that would result the Win/ Loss ratio to 7/3 within 02 trading days.

Frankly, this is a good result a trader can get. But if you wish to employ another indicator to filter out the uncertain setups, you might try the AC indicator.

** No magic is hidden here. The 5 Period & 20/70 level of ADX setting were begotten from trial & error process. This parameter can be adjusted according to individual assessment and experience upon his favorite timeframe.

YES, GO AHEAD. HOW AC CAN FILTER THEM OUT?

Now apply the AC indicator on the chart.

Its name says it all. This indicator was designed to oscillate the acceleration of the momentum without customization setting. The positive reading (above Zero level) indicates that the trend is accelerating bullish mode, and vice versa.

We were able to decline the unprofitable trades #4, #5 and #10 in advance, if we agree with the signal of AC when it indicates otherwise with the EMAs and ADX.

However, the winning trade #1 and #3 was removed due to this agreement.

AC trading rule:

You only place the Down Binary option if it satisfies the candlestick and EMAs and ADX’ restriction and rules for Down setup, when AC reads negative.

** Vice versa for Up Binary setups.

Finally, there would be 05 winning trades according to the latest restriction and rules of candlestick and EMAs + ADX + AC indicators that would result the Win/Loss ratio to absolute 5 within 02 trading days.

SO WILL I NOT HAVE ANY LOSING TRADE IF FOLLOW THE SYSTEM?

No, you will absolutely not. You will definitely lose, sooner or later, or miss even probably 2-3 trades in a row following the system. As proclaimed, there is no “Wall Street’s Secret System” that can make you earn on every opportunity and win all the time.

BUT IT SEEMS THERE WERE TOO MANY RULES MAKING ME HARLY FIND A SETUP SOME DAYS…

Correct. Since there was “a system” involved, your trading condition will be ”mechanized” that dismiss a few obvious profitable setups when you review them at hindsight. However, beside to recognize the high winning possibility setups, a system is designed to limit the high losing possibility trades also. So no one other but you that decide how aggressive/ conservative your trading style is, to unload the rules finding more trades, or uphold them on keeping you safe.

Look at the right next day for example, you can hardly find any trade if follow the rules of the system (as it was a touch day at a choppy condition).

Thus, adjust the indicator setting, or even replacing/ removing an indicator is fine. However, that would be your own system that traded at your own risk and benefit.

Besides, you better not mistake the reversal picking setups with the momentum ones, making you waiting for the indicators’ confirmation and miss a trade as assumed in the example below.

CAN THIS SYSTEM BE USED IN FOREX TRADING, PARTICULARLY TO TRADE THE BREAKOUTS?

Generally, it can be. Under the buying dip/ selling rally perspective of Forex traders, we are doing the same thing, but under the condition of Expiry.

Since we can avoid the initial false move and are indicated the momentum of the next candle, we may use it to trade the breakout in Binary Option also, on those setups which might occur earlier than when the Breakout – Pullback – Continuation patterns to take place. However, this system should be better used in the trending market.

HOW TO TELL WHETHER THE MARKET IS IN TRENDING MODE?

You are still in the Uptrend of the current timeframe as long as:

1) The price keeps traveling above the 50 EMA 2) The Higher Highs are made and the Swing Lows are formed

Therefore, you expect the following days remain its bullish momentum to trade on.

Vice versa is the Down trending market.

HOW LONG THE MOMENTUM WILL LAST, SO WE CAN MAKE THE MOST OF TRADING IT?

Actually, the market can hardly be forced due to someone’s wish. It can be trending incredibly for the whole week, or suddenly reverse at a moment you surprise the most. In order to assess the situation objectively, fundamental and sentiment analyses are required upon the case. However, there’s a so-called intraweek market’s cyclicity that Forex traders can exploit from, since it happens quite often. Look at the example of GBPUSD below.

There are 03 typical pulses have been often seen during a week. The early-week move is hesitant, while the mid-week move comes out with a strong trend, and weekend move pull the price back into consolidation. Looking at the weekly candle, its height is about ADRx3, and the distance from the Open to the Close is ADRx1.

Examine carefully, you will find out that the early-week move is often a false move (no, again?), which purposefully trigger pending orders from above the most recent swing high before dropping through the mid-week that aggressively put long holders in trouble, then suddenly reverse at late-week right after trapping short holders by another false move. But the momentum was found in there, wasn’t it?

Now look at a intraday chart and you will see something quite similar.

Surprising, isn’t it? No, it’s not a convention that repeats the same behaviour day after day, week after week, as the market will turn out to be so easy to guess. It has never been so. Yes, it might be purely a coincidence. And you might will return your … returns to the market if enter on every price’s breaks with hope catching the momentum, but ignore the rules and system’s indication.

So, in avoiding unnecessary damages, Forex traders should: - Not to jump in the initial price’s break (sooner or later, it would pull back in most cases). - Hunting the stop hunt: When the first false move of the week is done, trade in line with the “real”

one (the opposite direction). This trade can be converted to a swing trade for over 2 days long, and you wouldn’t mind hunting for the breakouts those next days.

- The real intraweek trend might last for 3-5 days in a row, but be highly conservative when it exceeds the range of ADRx3. (Trail your stop. Stop adding in. Use Binary Option to leverage instead.)

- Place an arbitrary pending order above/ below today’s high/ low for “tomorrow’s breakout” is not recommended.

** The false move and the real move often come in turn. However, nobody can run the universe for long. Ultimately, the market is driven by fundamental events which is complied with the majority bias. So don’t be afraid of a false move, nor overconfident about how the market is going to be, rather head up for possible scenarios and switch your mentality accordingly. If you find yourself being in a disadvantage situation, quickly get out and trade on another setups. Besides, using Binary Option can be the fastest way we use to react to the price movement, in whatever market’s condition, as long as the oppotunities are recognized.

FINALLY, WHICH STYLE SHOULD I BE, CONSERVATIVE OR AGGRESSIVE?

So, which type of girl you prefer, a strong personality but sometime rebellious, or a gentle disposition but a bit boring? (Sorry ladies, no offence. It just was a figure of speech.)

To be aggressive, you will catch the early trades when the rest do otherwise that highly rewarding making you feel yourself a genius sometime, but incur the loss more often.

To be conservative, you will let the most of uncertain setups go in which there would be some profitable trades, but should you be grateful due not to suffer the frequent losses.

It’s your own adventure to take. However, basing on individual experience and skill, you probably adjust yourself according to the situations.