60 Second Scalping Strategy for Binary Options.
The 60 second option is a binary option system that provides traders with the opportunity to generate significant returns to their portfolio using a product that is very easy to understand and develop strategies around. The best strategies to use when trading 60 second binary options are scalping strategies that are often used by traders who are attempting to take small amounts out of a market multiple times a day.
There are a number of technical analysis tools that a trader can use to scalp the market. These include the Bollinger bands and the parabolic stop and reverse. Technical analysis is the study of price action and helps traders specific points were a security is poised to change direction. When using these tools to scalp a market and trade 60 second options, a trader should consider using 1 minute time periods as a way of finding the best trading opportunities.
Using Bollinger Bands to Trade the 60s Option:
Bollinger bands were created by John Bollinger as a way of capturing the distribution of a security over a specific period of time and finding specific points were a security’s price action is overstretched. The default setting for a Bollinger band uses a 20 period moving average and generates a 2-standard deviation both above and below the 20-period moving average. The standard deviation shows how much variation or dispersion from the average exists. The standard deviation of a probability distribution is the square root of its variance.
All of these default settings can be changed to generate a distribution that will either increase the number of signals with less accuracy or decrease the number of signal with more accuracy. For example if the Bollinger bands were altered to 1 standard deviation around a 20-period moving average there would be more samples were it moved outside of its range than if it were moved to 3-standard deviations around the 20-period range. Additionally, if a 20-period moving average were changed to a 100-period moving average, the number of points that would move outside of the range would decrease relative to a 20-period moving average.
The chart above shows the EUR/USD one minute chart that is overlaid with Bollinger bands. The default setting of 2-standard deviation with a 20-minute moving average is used in this chart. The green arrows represent periods where a trader would purchase a 60 second binary call options when the price of the EUR/USD touched the lower Bollinger band, while the red arrows show a spot where a trader would purchase a binary option put when the EUR/USD touched the upper Bollinger band.
By changing the default as seen in the chart above to 3-standard deviation around a 20-minute moving average it is obvious that the number of instances where prices move to the upper end or the lower end of the range is reduced. This is because a 3-standard deviation move occurs much more infrequently and only occurs in 1% of the situations.
Using the Parabolic Stop and Reverse.
Parabolic SAR, created by J. Wilder in 1978, is a technical analysis tool that refers to a price system that is also based on time. The stop and reverse signal rails price as the trend extends over time. The indicator is below prices when prices are rising and above prices when prices are falling. If prices begin to fall after a period when they are climbing they will hit the stop and reverse point and a signal is then generated.
The parabolic stop and reverse is a complex algorithm, but what is important is that an investor understands the concept as opposed to the calculation. The stop and reverse follows price action and can be considered a trend following indicator. Once a downtrend reverses and starts up, SAR follows prices like a trailing stop. The stop and reverse, follows prices similar to a trailing stop loss and continuously rises as long as the uptrend remains in place. Once price stops rising and reverses below the reverse indicator, a downtrend starts and signal moves above the price.
As seen in the chart above the stop and reverse is either above the trend or below the trend and is a continuous indicator that given investors an opportunity to scalp the market. Using a 1 minute bar, a trader can use this signal to take binary option call position at the green arrows when the down trend reverses or put options near the red arrows when the uptrend reverses.
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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.