In the realm of finance, a plethora of laws and regulations exist, and mastering them can yield steady and substantial profits. Certain laws and rules vary based on the type of exchange one chooses to operate within. However, there are some fundamental principles that can be deemed “financial axioms”, which hold true across all markets, be it commodities or currency trading.
One such principle is that the price of an asset during a trading session cannot remain stagnant and cannot move continuously in a single direction. Once it hits a high or low point, the chart reverses in the opposite direction. Hence, being able to determine this limit is crucial for achieving consistent profits.
This is particularly true for binary options trading, where the correct prediction of price direction suffices to earn money. To tackle this challenge, a strategy with the of name Limit was developed. The system employs two commonly used indicators found in numerous platforms, including IQ Option, and can generate profits in 90% of trades.
The Limit Strategy is based on analyzing the price trend and detecting the turning points in the chart. By setting a limit on the price movement, traders can make accurate predictions and open positions with a high probability of success.
Short Intro to the Limit Strategy
The primary objective of the Limit Strategy is to identify the point where price reversal is likely to occur. This requires a thorough understanding of the asset’s fair market value and the onset of speculative growth or decline that is bound to be compensated soon. Bollinger Bands and Stochastic are among the most effective indicators for identifying these limits.
Bollinger Bands are trend indicators that create a comprehensive price channel representing the asset’s fair value. Stochastic, on the other hand, is a popular oscillator that generates numerous signals and is useful in detecting overbought (80-100) and oversold (0-20) zones, which indicate the market’s state and warn of an impending reversal. To apply the “Limit” strategy effectively, it is essential to configure the workspace settings properly. Here are the recommended settings:
- Chart: bars or Japanese candles;
- Asset: any highly volatile asset;
- Timeframe: from 1 to 15 minutes;
- Bollinger Bands parameters: default;
- Stochastic parameters: 5, 3, 3.
How to apply the Limit Strategy
As previously stated, identifying whether the market is about to reverse requires determining whether the price is outside the appropriate limits. Bollinger Bands signals that speculation has begun when the price exceeds the channel boundaries, whereas Stochastic indicates that the market is either overbought or oversold, indicating an impending reversal.
Given this information, a CALL contract should be purchased when the candle has broken below the lower Bollinger band and the Stochastic is oversold.
On the other hand, a PUT option should be purchased when the bar or candle has surpassed the upper Bollinger band line, and the Stochastic is overbought.
The expiration should be set to at least the time of formation of 4 bars or more.
It’s worth noting that no strategy can guarantee 100% profit. The Limit Strategy is no exception and involves certain risks. Traders must consider the market conditions and adapt the strategy accordingly to minimize losses. Additionally, it is advisable to practice using the strategy on a demo account before trading with real money.
This approach aims to take advantage of the anticipated market reversal and profit from the subsequent price movement in the opposite direction. By using this method, traders can potentially increase their profitability in binary options trading. However, it’s crucial to keep in mind that this strategy is not foolproof, and it’s essential to manage risks by using proper risk management techniques.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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