If you like working with the Moving Average indicator, we’re glad to offer you an efficient binary options trading system — the Loft. Several variations of this ingenious indicator strategy in combination with a very precise oscillator which determines the most profitable levels for making deals work equally well. Therefore, the strategy’s efficiency reaches 87 %, while the format of its trading signals are comprehensible and accessible to traders with any level of experience.
Binary options — moving averages in the Loft system
As we mentioned, this trading technique is based on a trend analysis tool Moving Average, which can accurately determine in which direction the trend is going to move and when exactly the market will change the direction of its movement. Due to the fact that this indicator can have several formats, you can create an indicator template which clearly shows the new impulsive movements of the trend. The strategy uses two types of moving average: SMA (Simple type), which shows the general direction of the market and a number of EMA moving (Exponential) periods, which notice the slightest changes in the current market situation. The combination of these two types and the periodicity of the moving average allows to trade on the wave movements of the market.
To obtain more accurate trading signals, the strategy uses the popular indicator RSI, which shows the strength and direction of the trend movement, as well as the turns into the extreme zones. As a result, a combination of technical tools and their settings determines the most profitable moments to enter the market with a correct forecast for a trading position.
Building a trading template
The Loft strategy is applied by means of a template, which you need to create on a quotation chart. In our example, we will use the terminal of the Binomo company — it provides all the necessary technical tools, executes transactions without any “slips” and operates without deadlocks.
Daytime and the asset with high volatility are the best conditions for trading, since this strategy is meant for trading on impulsive market movements. You can choose any interval of the chart, depending on the preferred trading style. We will choose the M1 timeframe. We set the following tools and settings on the chart:
EMA — periods 5, 10, 15 (color red)
SMA — period 30 (color blue)
RSI — period 10, levels 70 and 30
The system template should be displayed as follows:
Moving Averages Strategy for Binary Options — Trading Signals
The signals generated by the system are displayed on the chart in a simple format: a bunch of red movings will cross the blue one in a certain direction, the RSI oscillator will confirm the trading signal by entering the extreme market zone, which lies beyond the 70 and 30 marks.
For DOWN transactions:
the bunch of red EMA breaks the blue SMA downwards
the RSI line crosses the 30 mark and enters the oversold area
For transactions UP:
the bunch of red EMA breaks the blue SMA upwards
the RSI line crosses the 30 mark and enters the overbought area
Expiration and Money Managment
When using the M1 timeframe, the expiration of deals must be set for 5 minutes, allowing the asset’s price to pass a sufficient number of points in the predicted direction and remain in the positive part of the chart at the time of the expiration of the deal. It is also possible to use other timeframes, for which the time duration should be calculated additionally.
To reduce the level of risk, calculate the amount of the transaction depending on the amount of your deposit. With a rich trading account, the amount of the option should be limited to 5% of the trading account. With a modest deposit, the transaction amount should be reduced to the lowest possible amount. For example, Binomo company offers lots starting at 1 USD.