Binary Options Trading Oscillator Indicator

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7 Binary Options

Options platforms are distinctive individually but all of them consist of trade indicators and oscillators. Oscillators refer to indicators that are displayed below the chart with indicators, in a window that can be opened separately.

Oscillators are a great and useful referral point to traders because they encompass longer periods than the actual price list which means that they give traders more detailed information than the price list and should not be neglected by traders.

Binary options traders are often exposed to the risk of false signaling through prices, but using the oscillator traders have access to additional candle charts which will keep them on the right track. Oscillators are based on more candle charts which for sure gives a wider perspective on how to plan your options trades.

Oversold and Overbought Levels

The oscillator plays also an important role in oversold and overbought markets since with an oscillator you can always check on overbought and oversold levels. This enhances your winning chances given that you will know in advance of the particular market’s status and base your trading decisions accordingly. You will be able to place put options in overbought markets and call options in markets which are already oversold.

Still, one has to be careful with this strategy since the oscillator is not of use when trends are unfolding. The price ability might stay within the levels for a certain period before you have the opportunity to enter a range trade again. A range trade refers to a tunnel bet when traders bet on whether a price is going to stay within a predetermined range or not. In these situations, it is recommended not to rely on the oscillator.

This relates to technical analyses of the market in general whereby two approaches have to be considered. The one does include trend prediction and oscillators, but the other is associated with the use of trading techniques some of which are Market Profile (by J. Peter Steidlmayer from Chicago Board of Trade), Elliot Waves, the Fibonacci retracement (support (price stops going lower) or resistance (price stops going higher), the Gartley pattern (identify major turning points in the market), etc.

The Many Advantages of Trading With an Oscillator

The main reason the oscillator is so popular is due to its ability to display multiple periods in contrast to the fixed price which indicates only price values for specified periods. The multiple periods will give you a better display of the whole trading situation.

The oscillator is the best tool for trend trading including the strong movement of trends and small dips or spikes. If you happen to have a strong trend movement, the oscillator can indicate the ideal striking price for you when it moves closer to the oversold territory giving a hint when it is time to take action.

In order to optimize technical analyses of the oscillator, you may maximize the oscillator window over the whole monitor from the initial position of the oscillator which can be spotted at the bottom of the chart. Use the maximize option to count the waves, and the movement of higher highs and lower lows. Conducting technical analyses in this way gives you a different perspective on trading options, and you can use it to optimize your trading results.

The oscillator is strongly associated with multiple trading periods and should be used only within that context. The oscillator’s performance is not of much use when it comes to daily charts and trades with short-term expiration dates. Single time frame trades do also not fit with the oscillator strategy since the whole point of oscillators are the timeframes they are associated with. Oscillators’ main function can be reduced to analyses and comparisons of smaller and bigger timeframes which facilitate the decision-making process in options trading.

The Role of Oscillators as Continuation Patterns

The oscillators’ capability to display and indicate overbought and oversold levels makes them perfect as continuation patterns. The oversold and overbought territories indicate trade tunnels or ranges that are displayed by the oscillator whereby the secret to success would be to find the golden middle or the neutral area. This might sound hard, and it would be if it would be estimated through random picks, but there is a logical formula which facilitates the operation. You can simply take the maximum and minimum oscillator’s values and divide the sum by two to get the range middle. After you done that, right-click the oscillator window in order to edit the indicator. Add a new level or a new line in the center of the range which will represent the neutral level. according to reasearch theories, every time the market crosses that area or the neutral level indicates that there is room for the continuation pattern.

The continuation pattern is reflected for example when the market is moving downwards from the upper point and crosses the neutral level enabling the oscillator to act as a bullish continuation pattern reminding traders that it is time to call options until the market trend is still moving down but before reaching the overbought zone.

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Also, if we have the middle zone or level crossed by a trend moving upwards instead of downwards in a fast and straightforward move, then traders are supposed to trade put options before the neutral level has been reached by the trend in order to define the continuation pattern properly.

Oscillators in Binary Trading

When viewing charts that are , there are indicators called oscillators that are used. As we have learned, moving averages (MA) and trends are important when a binary options trader studies the direction of a stock. Binary options brokers will use oscillators when the charts are not showing a definite trend in either direction. Therefore, oscillators are most useful when a company’s stock either is in a horizontal or sideways trading pattern, or has not been able to establish a definite trend in an unpredictable market.

The true value of the oscillator is seen when the stock is either overbought or oversold. Using oscillators a binary options trader can see when the stock is losing momentum on the uptrend, the level at which the stock moves into an overbought situation. This simply means that the buying volume has been diminishing for quite sometime. This also means that traders will then start to sell their shares. Conversely, when a stock has been sold by a greater number of investors for a consistent period of time ranging from one to six months or longer, the stock will enter an oversold situation.

Stochastic Oscillator

The stochastic oscillator was introduced by George C. Lane in the late 1950s. The term stochastic means “guess” or “random” in Greek while to oscillate is to move back and forth. Stochastic oscillators consist of a scale from 1 to 100 and two stochastic lines, where one line is the “fast” stochastic, and the other is the “slow” stochastic. Signals are generated when the “fast” stochastic line crosses with a “slow” stochastic line. The indicator also produces signals when the stochastic line moves into the overbought region of the scale (i.e. 80 or above) or the oversold region (i.e. 20 or lower).

Stochastic Lines

A full stochastic consists of two lines, %K and %D. %K tracks the current market spot trade for a currency pair while %D smoothes out the %K line by calculating and plotting the exchange rate as a moving average. The following is the formula used to calculate stochastic lines

  • %K = 100 x (Closing Price — Lowest Closing Price for N Periods) / Lowest Closing Price for N Periods
  • %D = 3-Period Moving Average of %K

%K is the stochastic fast and %D is the stochastic low. This is because %D is a moving average based on the past 3 %K valuations, making it slower to react to changes in the spot rate.

It is always helpful for an indicator to be bounded in a constant range, such as the stochastic oscillator is between 0 and 100. For one thing, binary options traders do not need to worry about matters like inflation: there will be a similar pattern for an uptrend in the Dow whether it is looked at in 1950 or 2000, without any need to rescale it. This means recurring patterns in a market over a period of decades can easily be seen. It also means that the stochastic indicator can be used for intermarket analysis. Since the oscillator is bounded as it is, the patterns have the same size regardless of whether a trader is watching a stock that trades for $1, $20 or $50, a currency pair, or an interest rate future.

One major problem of the fast stochastic is the lack of smoothing. Jagged %K lines are common. They reach extreme readings quite frequently, jumping about and making it hard to interpret. An easy solution can actually be applied. Traders use a smoother line of the fast stochastic as the %K line instead, and then average it, using the new average as the %D line. The new line is the average of the average of the old line. This is how the slow stochastic is constructed.

Using the Stochastic Oscillator in MT4

The stochastic oscillator indicator can be added on the charts in MetaTrader 4. The binary options trader just needs to perform the following steps. First, open MT4, go to Insert-> Indicators-> Oscillators-> Stochastic Oscillator as shown below.

Next, the Stochastic Oscillator Settings Menu appears. Here, the trader can modify the different parameters of the indicator. The window should look something like the figure below.

There are two types of parameters: calculations, and visuals. Calculations are parameters that include the amount of periods used for the stochastic oscillator and other parameters. Visuals include how the indicator will look (color, thickness of lines, etc.)

Here is a summary of the parameters:

  • %K period: defines how many previous periods are used to calculate the main signal.
  • %D period: defines the amount of periods used to smooth the %K values.
  • Slowing: defines the number of recent calculations to average together for additional smoothing of %K.
  • Price field: defines if the lowest lows and highest highs are used for calculation or lowest closing and highest closing prices.
  • MA method: defines the moving average method for calculating the %D signal.
  • Fixed minimum/maximum: Defines the visual borders of the indicator. (stochastic values always range between 0 and 100)
  • Colors: defines colors for the Main (%K) and Signal curve (%D). They are shown in another tab as shown below:
  • Levels: The usual way of trading the stochastic oscillator is by looking for overbought or oversold conditions. These are shown by a value of over 80 (overbought) or under 20 (oversold). The levels will define the lines on the chart.

To change the indicators parameters at anytime, or to delete them, the trader can right click on the indicator to show the contextual menu shown below:

Start using this kind of indicator to integrate them to your trade. We have a list of the top binary options brokers that will help you get started with trading binary options using their great features and bonuses.

39# Rainbow Oscillator Binary Options Trading

Rainbow Binary Options Strategy High/Low

Submit by FreddyFX 14/01/2020

Rainbow Oscillator Binary Options Trading is a binary strategy High/Low.

Time Frame 5 min.

Expires time 15 min

Markets: Forex Major, Futurex, Indicies.

Exponential Moving Average (5 periods);

Stochastic oscillator (5, 4,3, low/High);

Fisher Yurik (10 periods);

Rainbow Oscillator binary (2, 10, 0);

FXSniperT3 Indicator (cci periods 7, T3period 3, b 0.618).

Rules for Rainbow Oscillator Options trading

All indicators are in the same direction (up trend).

Stochastic crosses up.

Accelearor is green.

FXT3CC is green.

Rainbow oscillator binary is above green bars.

All indicators are in the same direction (down trend).

Stochastic crosses down.

Accelearor is red.

Rainbow oscillator binary is below red bars.

Rainbow Trading

Herman (Tuesday, 14 January 2020 13:27)

Some hint use 15tf expiry 30m, trading at London session. Use martingale, never loss 4 in a row.

aAS (Saturday, 01 December 2020 13:02)

Anon (Saturday, 08 April 2020 11:59)

thanks alex let me know ^_^

Abdul (Tuesday, 10 January 2020 14:21)

This system is one of the best system i ever came across . it works well on 15M time frame..i modified it just contact me on my email ([email protected])

Alex (Tuesday, 13 December 2020 12:00)

Anon, I am in a active stage of testing this strategy. While testing I am doing changes, that improves the overall result. So far, I have to say – this is GREAT strategy. As soon as I finish my testing – I`ll let you know and we can exchange our thoughts. It takes me around a month or so, to have the most accurate indicators withing this strategy and method how to trade.

Anon (Wednesday, 07 December 2020 11:53)

If anyone manage to trade this strategy successfully add me on skype id riggedreality

Alex (Monday, 21 November 2020 20:35)

This is great strategy. I also have my modification, that works extremely well. The basis is Rainbow, but I use 15 minutes or 30 minutes timeframes (they are not as noisy as 5 minutes). I made the following adjustments: 1) got rid of stochastic – sometimes it is more confusing than useful; 2) insert one more EMA with a period of 26 – to determine a trend (never act against it). As soon as 5 EMA is over 26 EMA and bullish candle closes over these 2 EMAs – I am waiting for all 3 green bars of the indicators. As soon as this condition is met – I do CALL option on the next candle, not outright – but after a little pullback of this candle to the 5 EMA. Expiration – till the end of second candle (after pullback of current candle). PULL options are the opposite action. Do not forget about economic news and – successful trading guys! And thanks to FreddyFX!

Alex (Monday, 24 October 2020 19:15)

Strategy is good. But results could be much better, when you wait for a little retracement. So, when all conditions are observed, do not open your CALL or PUT options outright on the next candle. Wait for the price retrace back to the MA, and as soon as they cross each other (or are very close), enter with expiration till the end of the 3-d candle.

abdul (Tuesday, 08 March 2020 15:27)

this strategy is very good 89% EURGBP 10 wins – LOSS 0
just contact me [email protected]

HIRO (Thursday, 25 February 2020 01:37)

flo (Tuesday, 03 November 2020 11:54)

is there an alert for this=?

ELE (Wednesday, 28 October 2020 00:31)

Mathew, can you share this modified strategy of yours?

Mathew (Thursday, 17 September 2020 14:37)

I made some adjustments, exclusion and inclusion of some indicators, but it all started with the Rainbow.Today I have an excellent strategy, thanks to the Rainbow.

ik (Wednesday, 19 August 2020 04:08)

please the indicators for this trading strategy,i tried to download the RAR file but its not working,what are mine not doing well,please i need the indies in my email,[email protected]

Will (Monday, 18 August 2020 05:24)

If you further filter your trades by only trading trending pairs, avoiding pivot, strong S/R levels and waiting for at least 4-5 candles for expiry your results will improve. I personally use a MTF stochastic indicator but trade on the 5 min TF, This gives me a broader view of price direction and I also use the FIBOPIV indicator for accurate S/R/pivot levels to avoid market stagnation areas. I also find the addition of the HAMA indicator to be useful, but the 5 MA I the strategy is usually sufficient in identifying trend. Another great way to trade this is to only take the breakouts of pullbacks within the trend. Will

[email protected] (Wednesday, 06 August 2020 20:26)

Pedro can you make a video recording of how you take the trades and what to look for because the one image that is on here is kind of blurry? and if you could post it that would be great I appreciate it.

Pedro Dias (Wednesday, 23 July 2020 17:12)

Great strategy.
I’ve started using it at 1st of July of 2020 with the currencys EUR/GBP and EUR/USD.
I operate during the London market only and I stop 15 minutes before the USA market opens.

Today’s date: 23/07/2020 (16:09 GMT)

5 – Losses
28 – Wins
Total: 84%

7 – Losses
27 – Wins
Total: 79%

Time Frame: 15 minutes
Expire Time: 30 minutes

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Binary Options Trading School
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