Binary options crossover strategy

If you have been wondering what a Simple Moving Average is, then you came to the right web page. Today we are going to explain to you the fundamentals behind the Moving Average and how it can be applied in trading.

Then we are going to discuss an essential binary options trading strategy which involves the use of the Simple Moving Average.

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What is a Simple Moving Average SMA? The Simple Moving Average SMA is an on-chart curved line, which averages a certain amount of chart periods. In this manner, the Simple Moving Average is a relatively lagging indicator.

Binary Options Trading Strategy: Simple Moving Average - Binary Uno

This means that it needs more time in order to react to price moves. The blue curved line is a 5-period SMA. This means that the Simple Moving Average on the chart averages 5 periods in order to point a value in a certain moment. Each place on the SMA responds to a price level according to the Y Axis on the chart the price scale on the right. This level is an average of the 5 previous candle levels. The Simple Moving Average could be adjusted to average a certain amount of periods according to your will.

The more periods you include in your SMA, the more distanced and smoother the line will be. Also, the lag will be bigger too. Not that hard, right? The same applies for bigger period SMAs. If you use a period SMA, the last 20 periods on the chart will be averaged the same way as with the 5-period SMA. In that case, the formula will look like this:. Since the SMA is a lagging indicator which acts as a support or resistance, it is a very useful tool to confirm trends and reversals.

If the price switches above your SMA, then you get a signal for an eventual bullish trend. If the price goes below your SMA, then a bearish trend might be on its way. The higher period your SMA is, the more accurate your signal will be. However, higher period SMAs put you in the market later, because the lag is bigger.

Have a look at the image below:. This is the minute chart of the Apple Inc. We have included a period SMA blue and we have marked all the signals it provides. Notice that in most of the times when the price switches through the SMA, we see a new trend coming. However, there are two false signals which can lure us into bad trades. The SMAs can be combined on the chart.

Higher period SMAs react slower to price action, while lower period SMAs react faster. This way, two Moving Averages on the chart would often cross and interact with each other. This is how traders generate signals. If our two SMAs cross upwards, we get a signal for a bullish trend.

If the two SMAs cross downwards, we get a bearish signal. In this manner, we will buy when the two SMAs cross in bullish direction and we will sell when the two SMAs cross in bearish direction. This is the H4 chart of the Gold for Sep 3 — Nov 3, The blue curved line is a period SMA and the red curved line is a period SMA. Notice that the blue period SMA moves faster than the red period SMA. This is so because it is a smaller period SMA and has less lag.

Thus, this is the faster SMA on the chart. The green circles show the moments where we open a new trade with closing the previous one. The black arrows show when the SMAs are tested as support or resistance. We sell when the two SMAs cross downwards. We hold until they cross in the opposite direction.

We generate a profit equal to 1. With the closing of the first trade, we open a new trade, which is long we buy.

We exit the trade when the two SMAs cross downwards. We generate a profit of 0. With the closing of trade 2, we enter trade 3, which is short we sell. We hold until the SMAs cross upwards. Unfortunately the signal is bad and we accumulate a loss of 1. Closing the losing trade, we enter a new long trade. We hold until a downward SMA crossover.

We generate a profit of 1. For inquires write to: BACK main menu Home page Open account Trading room Help FAQ Company About us Legal Payment Methods. DO NOT CLOSE THIS WINDOW.

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Moving averages crossover strategy | Binary Options Zone

Binary Options Trading Strategy: Simple Moving Average If you have been wondering what a Simple Moving Average is, then you came to the right web page. This is how a 5-period Simple Moving Average looks on a chart: This is how the 5-period moving average formula looks like: In that case, the formula will look like this: Have a look at the image below: A Trading Strategy That Works The SMAs can be combined on the chart.

If you are getting confused, this image will make it all clear for you: The image shows 5 trades based on crossovers of our SMAs: Open Account Trade Now Education Help About Us Contact Us. About Us FAQ Facebook Contact Us. Upload File Which documents do I need to upload?