The scheme of trading binary options using Fibonacci levels

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The scheme of trading binary options using Fibonacci levels

Being a beginner in trading binary options, you probably already reviewed many strategies for trading binary options. All effective strategies are based on trade in the direction of the so-called trend. It is necessary to make a deal precisely when the price is reversed. This phenomenon in the world of trading is still called correction. When the time comes for the correction of prices for the selected trade asset, prices begin, as a rule, to unfold. To determine the depth of the correction of the value of the asset we need, we will use the Fibonacci grid.

The Fibonacci grid is nothing else but a tool for technical analysis.

Fibonacci grid

As we said earlier, the Fibonacci grid is an analysis tool that is based on the patterns of Fibonacci numbers. As this regularity looks, every number that follows the previous one is equal to the sum of the two previous numbers. For an example, it’s better to look at a series of numbers constructed using this pattern (1, 1, 2, 3, 5, 8, and so on).

The construction of such a series will allow us to determine the depth of the correction of quotations of assets of interest to us. Using this series of numbers, you can also determine the size of the future wave of price movement.

How this strategy works

As a rule, every modern binary options broker is trying to provide a large selection of analysis tools for successful trading. The instrument that interests us most often is in the section of graphical analysis tools. It is called the Fibonacci Grid.

Model the situation. Movement of quotations a certain period of time moved upwards. As you understand yourself, making a deal to raise in this case will not be the most correct decision. There is an opinion that it is possible with a high probability to turn the quotations in another direction.

The optimal level of the conclusion of the transaction is the price increase due to the corrective movement. After the turn, quotes should continue their movement towards the trend.

Defining this level

To do this, we need to apply the Fibonacci Grid to the quotation schedule. Next, we determine the trend we need. Based on the growing trend, we will need to place the “0” level, that is, this will be our foundation. Accordingly, the “100” level will be our top.

Now we need to place these indicators in the appropriate places on the quotation chart. Now it will be in order to examine the typical levels between which the correction will occur.

– Between 50% and 62% for growing trends

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– No more than 62% for downward trends

Having reached these levels, quotes have the property to turn in another direction and will continue their movement towards the trend.

Fibonacci and Binary Options

One of the more popular methods of predicting asset movement is through a sequence of numbers known as Fibonacci retracement. Many Forex traders use this method to help them figure out when to enter and exit a position within a currency pair, but it really can be used with any type of asset. With a good charting package you will be able to calculate these price levels automatically, but having a good understanding of what they mean and how these numbers can impact your trading is still necessary for being successful with this method of trading.

What it is?
A Fibonacci retracement is a method of technical analysis that is sometimes used as a short term trading tool that can help traders predict future price movements. Fibonacci retracements are based upon the Fibonacci sequence of numbers where every new number is based upon the sum of the past two numbers. A common sequence would look like this, “1, 1, 2, 3, 5, 8, 13,” and so on. The most commonly used levels when it comes to short term trading are 23.6, 38.2, and 61.8. 50.0 is also sometimes added into the equation in order to give a stable point of reference.

Risk Warning – “Investors can lose all their capital by trading binary options”
How it works is quite simple. These numbers often act as support and resistance levels within the price chart of a given asset. Why it works is not entirely clear; it could even be a sort of self-fulfilling prophecy that traders make happen simply because they expect it to happen. Still, this happens often enough that it has become a viable way to help a trader make money.

When a currency is headed in a certain direction, it will often meet resistance at the 23.6 percent mark. So if a pair is headed down in price, when it reaches 23.6, the fall will level out or perhaps even slightly reverse. This resistance to change is usually short lived, and the price will continue within its predominant trend shortly. The same will often happen around 38.2 and 61.8 percent.

How to use Fibonacci?
When you’re using Fibonacci retracement within your trading, how you use it depends upon your timeframe, especially if you are trading binary options. The common rule of thumb is that you should not trade against the dominant trend, and Fibonacci numbers do not go against this wisdom. Even if you are trading 60 second binary options, you do not want to go against the trend, even if you are at a key price level. There is no way to predict how long this resistance will last. The best way to handle the situation is to pause your trading on the asset in question until the retracement period has passed. So if you are trading 60 second call options on the USD/CAD pair, and the price hits the 38.2 percent level, the best way to handle this is to simply stop and wait. Once the retracement period goes by, you can resume your trading.

So the best way to use this is as a warning system. Prices will pause at a certain level more often than not because traders expect them to. In reality, Fibonacci numbers don’t work on a mechanical level, but rather a psychological one. Still, it does regularly happen, and you need to be aware that it will happen if you want to be successful. During the points of resistance, prices will not follow the trend, but may go slightly up or down while stuck here. Even with 60 second options, the slight movements are not going to be profitable for you often enough to be worthwhile.

«Dome» – forecasting options trading system based on Fibonacci levels

Trading tactics of binary options called «Dome»

Professional traders very often use combined techniques to predict the market in technical analysis. This allows them to maximize their financial performance in the binary market. Today we offer one of the simple examples of market forecasting systems – “Dome”. The work of Dome is based on the use of the Fibonacci graphical arc and the classical oscillator MACD indicator. This technical approach to generating signals allows us to accurately determine the market’s reversal trends and leads to a high and stable dynamics of capital increase.

Trading system «Dome»: technical requirements

The system requirements of the “Dome” strategy must be considered through the prism of the trading terminal for trading options. Therefore, immediately outline the range of necessary services and parameters of the platform that we need to operate the trading system:

– availability of a special service for constructing the Fibonacci arc;

– the possibility of applying indicator tools to the working schedule;

– Graph with variable timeframe;

– availability of turbooptions on the terminal;

– expiration period from 60 seconds;

– maximum payments on options;

– Good selection of assets;

– The minimum threshold for entry into trade.

As an example of a service with such capabilities, we offer a platform from a licensed Binomo broker. The terminal of this company has professional equipment and provides the most optimal financial conditions for working in the option market – the minimum starting capital is $ 10, the option amount is from $ 1.

Trading system tools

So, we came to the technical side of the system. To mark the graph and apply this approach, set the following technical set of analysis tools on the quotation chart:

– The Fibonacci Arc. These are classical levels calculated by a special algorithm, but not linearly constructed, but in the form of arcs that outline possible ranges of fluctuations in quotations. The use of arcs allows us to identify more dynamic market movements, which leads to better forecasting efficiency. To build the necessary layout, open the Binomo terminal’s graphical tools service, select the Fibonacci tool in the Arc mode, and connect local extremes of the market with it;

– MACD indicator with standard format settings. This technical service will be used as a means of confirming the spread of quotations, which will maximize the effectiveness level of the strategy signals.

All the specified set of services is set to the timeframe of the working schedule 30 seconds. After configuring the workspace of the terminal, you get the following markup:

Dome market forecasting system: trading rules

To open the PUT trade, it is necessary to wait for the moment when the quotes of the asset after reaching one of the Fibonacci arcs will turn to decrease, and the MACD indicator will form the divergence of the oscillator lines down:

To open the CALL trade, it is necessary to wait for the moment when the quotes of the asset after reaching one of the Fibonacci arcs will turn to growth, and the MACD indicator will form the divergence of the oscillator lines up:

Expiration

Taking into account the periodicity of the frame of the trading quotes schedule, the optimal time period for expiration of options in this case will be a period of 120-180 seconds. Such a narrow trading range allows you to accurately fulfill the forecasts of the system and leads to a quick result.

Risk management

In fact, the system offers investors to work in the mode of trading scalping, which is characterized by the greatest risks. For this reason, we propose to use options with initial value or trades to reduce losses, the risk level of which does not exceed 3% of the invested amount.

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

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