The majority of brokers offer Touch or No Touch binary options this type of trading is cut for trading markets which are ranging ( Range Trading ). In case you have difficulties in identifing if market is ranging or not, you can use the Moving Average Convergence/Divergence (MACD) indicator.
Using the MACD Indicator
The MACD is used by those traders who want to spot changes in market trend and its momentum. Nevertheless, in case you need to spot a ranging market this indicator may be quite useful as well. For that just make minor adjustment to the MACD histogram by adding 2 more lines above and below the zero line as shown in the diagram below.
The value of the lines, 0.0005 and -0.0005, depends on the number of decimal places that your chart platform is using. If your broker’s platform happens to quote you with 5 decimals places, then the lines should be up to 4 decimal places. After you’ve added these 2 lines, any activity that hovers around the zero line and between the 2 lines above and below is an indication of a ranging market. The great thing about using this method to detect ranging markets is the fact you are able to do so while trading in real time. Once you are confident that the market you are trading in is ranging, the next step will be to define the resistance and support levels of the market using the Bollinger bands.
After you understand that the market is ranging, you will have to define the range of prices which the market is ranging in, which is the resistance and support levels. Although the Bollinger bands are used for measuring how volatile the market is, the two bands also indicate the confines of the ranging market. Hence, we can use the upper band and lower band to define the resistance & support levels respectively. In case you’ve done everything right, you will end up with 2 strike prices. The last step is to decide what type of contracts that you want to trade with.
Because you are using two indicators you will end up with very reliable indications about the state of the market. Another benefit of using this method to trade ranging markets is that you also get your strike prices defined for you by the Bollinger bands.
I was often told that the Range Trading strategy basis of all trading strategies. Are there people who successfully apply range trading strategy in practice? As practice shows, it can differ from the theory. My friend, based only on 2-3 trading strategies, made a fortune.
This is certainly a good article, but there are a lot of video materials on the Internet that tell how to apply range trading strategy in practice to make a profit. This is a very simple trading strategy, but it requires some skills and understanding of the basics of trading on binary options.