Choosing Indicator Types

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A boundary option is one trade option that gives four possible outcomes, depending on the broker that you are using. The trade outcomes are as follows: Here the option is in the money if the price action is outside the selected price boundaries on expiry.

Here the option is in the money if the price action is inside the selected price range on expiry of the contract. Where the trader needs the price action of the currency to breach the selected price boundaries just range trading binary options indicator to make a profit range trading binary options indicator the trade.

This gives the binary options trader ample opportunity to decide which trade is best for him at that point in time. The first step in using this trading strategy is to decide on the range to use. Range trading works best when the market is consolidating or in other words, when the market is trading sideways and not trending.

The best way to detect a range-bound market is to use an indicator that shows you exactly in what direction the market is trading. One such indicator is the Bollinger band. Invented range trading binary options indicator John Bollinger, the Bollinger band has a lower band, a middle band and an upper band. The upper and lower bands show the confines of price movement in a consolidating market. Take a look at the chart below to see the illustration:. The Bollinger bands reveal the range of prices between the price floor and price ceiling.

Once you have something like this showing on your charts, use your horizontal line tool to trace two lines as shown. You now effectively have the 2 strike prices you need for your boundary trade.

You can now decide on which of the four boundary trade option contract types to purchase, and set relevant expiry dates. Most brokers will allow a minimum of 7 days range trading binary options indicator expiry, so make sure that the period of consolidation will at least, exceed that time frame. Range trading binary options indicator you use a daily chart like we did above in this example, you will be able to get enough time to set an expiry. The boundary trade is not the only binary option contract that you can trade with this strategy.

The bias here should be for a No Touch option contracttaking time to set the price barrier either to the range trading binary options indicator or downside, well outside the range of prices as demarcated by your price floor and price ceiling. This way, you are sure that the price action of the underlying asset has no chance whatsoever of coming close to your price barriers.

If you need the price action to breach the boundaries, you can adjust your price barriers accordingly to make this happen. Trade Setup The first step in using this trading strategy is to decide on the range to use. Take a look at the chart below to see the illustration: Trade Types to Execute You can now decide on which of the four boundary trade option contract types to purchase, and set relevant expiry dates.

Final Note The boundary trade is not the only binary option contract that you can trade with this strategy.

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The oscillators are probably one of the most ideal sets of indicators that help traders in ranging markets. Due to the sideways movement of price, it is often difficult for traders to pick the peaks and troughs. Also known as the oversold and overbought levels, the oscillators can be useful when trading the sideways market.

However, trading the ranging markets can be very risky as price can often strongly reverse. Winning trades can quickly turn into losing trades if the profits are not booked regularly. Among the different types of oscillators available, the Stochastic is one of the most useful technical indicators when trading sideways markets.

The Stochastic oscillator was developed by George C. It is a momentum indicator. Momentum in technical analysis determines the speed at which price moves.

Thus, when prices are rising and the momentum is strong, you can expect price to continue in that same direction. When momentum starts to decline, you can then expect price to reverse or make a correction. The Stochastic oscillator was developed in the s, and the indicator plots the values by comparing the current price to the price range over the determined period of time.

Typically, the Stochastic oscillator reaching above 80 and turning lower signals momentum is slowing. Thus, combining the above information, traders can determine the rising and falling momentum in price. The Stochastic oscillator is often referred to as fast and slow Stochastic, which indicates the settings. The fast Stochastic has values of 5, 3, 3, while the slow or full Stochastic has values of 14, 3, 3. The only distinction between these two values is that the fast Stochastic is more sensitive to price action, while the full or slow Stochastic is slow to react and is ideally used in long-term analysis of the markets.

The Stochastic oscillator is used in the forex market to determine the support and resistance levels. As these are one of the most important levels in determining price action, traders can use the oscillator and the support and resistance levels to determine the momentum. Forex traders can also use the indicator to pick the turning points in the market based on where the value of the Stochastic oscillator sits. The Stochastic oscillator has the 80 and 20 levels as the overbought and oversold levels.

When price falls from 80, sell signals are generated, and it suggests momentum is weakening. This means the previous direction of price could start to reverse or correct. Similarly, when the Stochastic oscillator starts to rise from the 20 level, known as the oversold level, then momentum is beginning to rise. In most cases, the Stochastic oscillator can signal a reversal only to fall back below the 20 level or rise and stay above the 80 level.

Thus, it is essential for traders to trade not just with the oscillator. They should take into account the various market contexts and other indicators as well. For the range strategy, the first step is to analyse the markets and identify potential support and resistance levels. This can be accomplished either by price action analysis or by using daily pivot points, plotted on the intraday charts. Once the support and resistance levels are identified, the next step is to wait for the Stochastic oscillator to be overbought above 80 and turn lower.

Ideally, at this point, you should expect the price to be near a resistance level. You can then sell at the resistance and book profits based on your risk to reward set up. Likewise, to go long in the markets, simply look for price at support and wait for the Stochastic oscillator to be oversold below Then, wait for the Stochastic oscillator to reverse at this level and go long in the market. Traders can also use the Stochastic range strategy with binary options.

For intraday trading or end of day expiring options, it is ideal to use the minute chart, where you can plot the support and resistance levels. The daily pivot levels can also be useful if you find it difficult to plot support and resistance levels by yourself. Similar to the buy and sell signals outlined above, you can purchase Call or Put options for a few hours or for end of day expiry time. The charts below signal the Call and Put binary options based on the range strategy using the Stochastic oscillator.

In the above example, we can see a Call option. The up and down arrows depict the price levels based on our plotted support and resistance levels. When price falls to the support level, the Stochastic oscillator reversed from the oversold level below In the above Put option, we can see how price reverses near the previously identified resistance level. When the Stochastic oscillator moves into the overbought level and starts to reverse, a Put option can be purchased.

The Stochastic oscillator is a very versatile technical indicator that is easy to understand. However, traders should note that there are high risks when trading the ranging markets and simply using signals from the Stochastic oscillator is not good enough.

To decide on your entry, you always need to consider the price action and upcoming events. With practice and experience, traders can use the indicator to trade the sideways markets in both forex and binary options. Skip to main content. Stochastic Oscillator - How to trade ranges You are here Home. However, the Stochastic oscillator can help those that move within fixed values.

Stochastic oscillator - the momentum indicator The Stochastic oscillator was developed by George C. How to use the Stochastic Oscillator in Forex The Stochastic oscillator is used in the forex market to determine the support and resistance levels. The ideal settings for trading currency pairs are 5, 3, 3.

Overbought and Oversold levels The Stochastic oscillator has the 80 and 20 levels as the overbought and oversold levels. Stochastic range strategy For the range strategy, the first step is to analyse the markets and identify potential support and resistance levels. Trading binary options Traders can also use the Stochastic range strategy with binary options. Range strategy Call trade In the above example, we can see a Call option.

The Call option purchased here eventually sees price rising to the resistance level. Range strategy Put trade In the above Put option, we can see how price reverses near the previously identified resistance level.