15 Minute Binary Options Trading Strategy
InvestingOnline.com
22/03/2018, 03:43The 15 Minute expiry strategy is very popular among binary options traders.
Considered a medium-term expiry, it is recommended a 15 Minute binary options trader choose forex options or stocks as an asset class preference. This is because, when trading a medium-term expiry, a high probability trade most often presents itself when both trend and volatility can be predicted with confidence.
Volatility
Often overlooked by inexperienced traders and considered a source of fear (which for the most part is unfounded), volatility offers the opportunity for traders to profit from almost all types of price action.
Price volatility, in its simplest form, is inconsistence price movement with no defined trend. Considered a measured of price action (upward and downward) swings and the rate of change of those swings, a highly volatile market has major swings and price action can be spread over a larger range (wide fluctuations in price). Lower volatility indicates a more stable market whereby price action does not dramatically fluctuate, but rather changes in value steadily over a longer period (narrow fluctuations in price).
Measuring Volatility
Used to confirm price action behavior, a 15 Minute binary options trader can measure volatility to generate high probability trading opportunities. Most typically, volatility technical indicators Average True Range and Bollinger Band Width as well as High Minus Low (for trend confirmation), give traders confirmation signals for profitable trading.
Average True Range
Measured as the difference between the high and low price on a given day (and accounting for overnight price gaps), Average True Range (ATR) is a volatility indicator which displays the level of interest (or disinterest) in a price movement. An asset experiencing a high level of volatility will have a higher ATR, and a low volatility stock will have a lower ATR.
A bullish reversal with an increase in ATR is interpreted as strong buying pressure and reinforces the price reversal. A bearish reversal break with an increase in ATR shows strong selling pressure and reinforces the reversal break.
Bollinger Band Width
Derived from the Bollinger Band technical indicator, Bollinger Band Width measures the percentage difference between the upper and lower Bollinger Bands. When charted, Bollinger Band Width decreases as Bollinger Bands narrow and increases as Bollinger Bands widen, and because Bollinger Bands are based on the standard deviation, falling Bollinger Band Width reflects decreasing volatility and rising Bollinger Band Width reflects increasing volatility.
High Minus Low
Calculated by subtracting the low of the day from the high of the day (pure price), the High minus Low indicator returns the price range of a particular trading day. Considered a running index of the high price minus the low price and is used to gain a view of price action volatility, if the High Minus Low indicator is displaying an upward movement, the market is considered bullish. Conversely, if High Minus Low is trending downward, the market is considered bearish. Furthermore, the more volatile the stock’s price, the wider the range.
Trading Signals
Volatility is typically cyclical in nature and tends to go through periods of high and low phases. Specifically, a period of low volatility now tends to follow a period of high volatility and vice versa.
Because binary options traders are not concerned with how much an asset moves in price; only the direction, a binary options trader trading a 15 Minute expiry can successfully combine the 3 indicators to determine current price levels and predict future price volatility.
The USD.JPY chart shows periods of high and low volatility. Most commonly, volatility spikes during sell-off phases however, volatility also rises during periods of sustained upward price action. This is shown on the chart by high Average True Range and Bollinger Band Width values. The higher High minus Low range value confirms wider price ranges associated with high volatility.
For a 15 Minute binary options trader, a Call or Put trading signal is achieved when, during periods of high volatility, a bullish or bearish reversal pin/and or an inside bar is charted generating a high probability trading opportunity.
