Force Index Binary Options Trading System.
Force Index indicator was designed especially for that purpose. Its mathematical formula takes into the account three parameters: price direction, trading volume and extent. Such a combination allows the indicator to point out active periods when the fight between the bulls and bears becomes aggressive. The best period for the Force Index indicator is 13 bars, while the range of timeframes is wide. The only requirement is not to pay attention to timeframes less than 30 minutes as those charts are full of false trading signals. Force Index requires two additional technical tools to be used together and help traders to avoid misleading information. The simple moving average traditionally shows the trend direction perfectly, while the best period here is 20 bars. MACD indicator was designed to show a reversal, and it’s also used in this trading system with default settings.
As far as we search for periods with high activity and an essential likelihood of the trend reversal, we’ll be monitoring moments when MACD lines are below the zero level before buying call options. The main trigger for us to start the trading cycle is when MACD lines perform a crossover, while the SMA20 curve remains below the current price. In case if the Force Index edges up at that moment, we start buying call options. Exit conditions are different, and they depend on an individual trading strategy. Some conservative traders might stop purchase call options when the underlying asset moves for a certain number of pips, while others would prefer an opposite signal to occur. For instance, if MACD lines crossed each other above the zero level, then the trading cycle of buying call options should be stopped.
Before considering the beginning of the put-options cycle, the following conditions have to be met. First, MACD lines must cross each other in the positive territory, signalling that the uptrend is getting closer to an end. SMA20 should edge lower and appear above the current price, while the Force Index indicator must point to a downtrend. If all three conditions happen simultaneously, we start buying put options. An example of the trading system in action is shown below.
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