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Contents

Start Trading Binary Options with Fibonacci Tool now!

One of the most important trading tools one trading platform can offer are for sure the Fibonacci tools, the retracement, expansion, but also the time zones and arcs. Knowing what they are useful for and what to do with them offers the binary options trader a competitive advantage in finding the perfect striking price and expiration date needed for the option to expire in the money. For CFDs traders they are indenspensable in trying to predict the future movement of the underlying assets.

Regardless of the trading platform involved, this is the tool that takes into consideration the retracement for specific waves (Fibonacci Retracement), the extension for impulsive moves (Fibonacci Extension) or even the time element (Fibonacci time zone). In our situation here with the Forex Academy program we are looking at the Fibonacci Extension Tool and how can a trader use it and, more importantly, how to actually trade based on it or with it.

How to Use Fibonacci Extension Tool

Trading implies taking the time element into consideration and, depending on the time frame traded, the expansion tool provided by Fibonacci is of real help. Our examples there deal with one of the most common pattern of them all in trading markets: the impulsive move using Elliott Waves theory. The thing is that in an impulsive move at least one wave needs to be extended and this wave it is usually the third one. That means the trader, after identifying a possible first wave, should take the Fibonacci expansion tool and look for the 161.8% extension when compared with the previous wave. Clicking on the beginning on the first wave a, the end of it and the end of the possible second wave gives us the setup for the extension tool and the outcome should be expected at the 161.8% level. If this is not coming, then the move is not impulsive and the whole count prior to that point should be reconsidered.

Predictions Based on Fibonacci Numbers

This tool is only of the many that any trading platform is offering as Fibonacci is being used in pretty much everything that is related to technical analysis theories. There is simply not possible to make a prediction based on patterns if one is not considering the Fibonacci numbers. The Expansion tool is used to find out the extended waves in impulsive move, but also in finding out, let’s say, the end of the b waves in running triangles.

In any impulsive move there is mandatory for price to go and extend one wave and this means that one wave should go and stand out of the crowd, it should be the longest one. The extension has some minimum boundaries, and in order to find the exact place we need to use the Fibonacci expansion. In other words, let’s say we have a move to the upside and market is accelerating but according to our analysis it should reverse at some point. The way to find out the potential level is to look at the length of the first move higher and then measure the 161.8% extension out of it.

Looking for Extended Waves

Applying the extension from the end of the second wave would offer the trade an educated guess regarding the end of the third wave and a put option can be traded with the expiration date being related with the time frame the impulsive move was appearing on. It is advisable that one should look for extended waves or move before important economic events as market needs a reason for a specific move and the reason is coming out of the economic agenda. Therefore, releases like jobs data, GDP (Gross Domestic Product), retails sales, unemployment rate, etc, may prove decisive for a central bank to change the monetary policy stance and that is the moment markets are travelling.

Fibonacci Expansion Tool and Corrective Waves

The expansion tool can be used in corrective waves as well as the b wave in a flat for example can be a strong one, and this means it should break the highs/lows of the previous wave a, depending if wave a is bearish or bullish. In this case, a move for the b wave above the 161.8% level signals a c wave to come that should not break the lows/highs in the previous wave a and therefore trading call options by the time price comes into the territory of wave a is indicated.

The Fibonacci Expansion tool is a simple one to use in the sense that one should only select it from the Menu (in the case the analysis is made on Metatrader then one should go on Insert/Fibonacci/Expansion) and then click and drag it on the screen. It should be noted that if you’re looking for a running correction, namely when the bearish correction ends above the end of the previous bullish move, then the expansion tool on the Metatrader cannot be used. Other trading platforms though, like the JForex for example, are not having this issue.

Find out exactly where and how to use the Fibonacci expansion tool by watching the two video analysis that are coming with this educational series.

Fibonacci Retracement Binary Options Strategy – How It Works

Fibonacci Retracement is an innovative technical strategy based on the Fibonacci tool, developed to detect more stable retracements. Compared to the original Fibonacci usage, the new system is considered much more effective. This article will show you in detail how to apply this strategy to collect binary options trading opportunities.

What is Fibonacci Retracement?

As you already know, the Fibonacci trading tool is highly appreciated by many traders due to its accuracy in spotting bounces/reversals. It’s mostly applied to determine hard support and resistance barriers. Therefore, in that logic, let’s say you draw two Fibonacci retracements and see some overlapping levels, surely they are ‘stronger’ and likely to halt prices better than the separate thresholds, correct?

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The good news is, both Fibonacci Retracement and Extension can be used in this way, and this technique could be applied to any financial assets, from currency pairs, commodities, indices to cryptocurrencies. However, in order to make this strategy work, you must know how to combine the Fibs correctly. Let’s review some practical trading examples to find out how to use this Forex Fibonacci strategy precisely.

How to use Fibonacci Trading Strategy?

Remember – the larger the trading time frame is, the more accurate the signals are.

Let’s say you are watching an uptrend. In a bid to identify the obstacles that prices may bounce at, you draw a Fibonacci retracement. The first point is the lowest point of the trend, while the final point is the highest swing high.

After having the first Fibonacci retracement, your work is to create a smaller one to seek the overlapping levels. The smaller Fib’s first point will be the nearest swing low (must be easy to look), while the final point is at the same place with the large Fib’s ending point.

As you can see, the 23.6% level of the large Fib is very close to the 50.0% threshold of the smaller one. That support area is highly reliable and sufficiently strong to force prices to retrace.

On the contrary, you can create a large Fib in a bearish trend by drawing from the highest point to the lowest swing low of the trend. The smaller Fib is made in the same manner as in an uptrend: drawn from the nearest swing high to the lowest swing low. Of course, the swing high must also be obvious.

Top Binary Options Trading Tools

The Right Tools For Binary Options

Binary Options, What Are They?

Binary options are a growing phenomenon in the trading world. What were once considered to be a fringe industry, gambling and scams are now gaining wide spread acceptance. Numerous world governments have even accepted binary options as valid financial instruments and have begun regulating them as such. Although they exist in many forms, all binary options have one thing in common. They are all worth 100% of the expected return if they close in the money and they are all worth 0% of investment if they close out of the money.

  • Binary Option- Fixed return trading vehicle with an all or nothing pay out structure.

Trading Tools Or Binary Options Trading Tools

Binary options are a newer form of speculating financial markets. They are different than most other types of trading vehicle but still follow the same basic principles. For one, the value of the options varies with the value of the underlying asset. For another, it is possible from the movement of the underlying asset regardless direction. That means it is possible to profit with binary options when a stock, commodity, index or other tradable asset loses value. Another thing that binary options have in common with other types of trading vehicles is charting. You use the same charts, the same technical analysis and the same indicators as you would to analyze any tradable financial asset or derivative trading vehicle. Of course, as with any type of trading, not all tools and strategies work well with binary options. Some work better than others and some even seem meant for binary trading. I have compiled here a list and description of what I have found to be the top binary options trading tools today.

A little about me. I have been trading for over 10 years and trading binary options for over 2. I make most of my trading decisions on technical analysis and have used or reviewed nearly every indicator and tool there is. For more information on me, binary options and binary trading visit my blog dedicated to social trading binary options.

Time Series Forecast For Binary Options

Binary Options Trading Systems

These tools are all very useful for binary options traders but none of them represent a good system by itself. A sound binary options trading system will not rely on any one indicator, but on number of indicators. Using only one tool to generate signals will result in more losses then using two or three together. A good trading system also includes some form of risk management element in order to protect capital.

Time Series Forecast And Binary Options

The Time Series Forecast is one of the best tools for binary options I have seen and reviewed. The indicator uses the intersection of a series of linear regression models to create a line that tracks price movement. The indicator is meant to predict where prices are heading in the near future. Because of the nature of how the indicator is created it is also referred to as a moving linear regression. Interpreting the TSF is similar to a moving average but with some notable advantages. First, the TSF does not lag prices the same was as a moving average does. Second, the TSF predicts the direction of the next periods prices more accurately than a moving average.

From my experience the TSF works best when used in a trend following manner and with other indicators like support, resistance and trend lines. You can see in the chart above that the OEX makes a bounce from support in late November 2020. The resulting bounce is in line with the prevailing long term trends so bullish trades are in order. A signal is given each time the price of the OEX dips below the TSF and then crosses back over. Most of these signals will short term in nature. Since this is a chart of daily prices expiry on most positions should be limited to a fews days to a week. A few signals, such as the ones occurring close to the trend line, will have a longer term implication and may be traded with positions lasting a few weeks to a month.

Fibonacci Retracements For Binary Options

The Golden Ratio

Fibonacci did not discover the Golden Ratio but he did bring it to the west. Prior to that the ratio, the Fibonacci Sequence and their importance in nature were well known to Arabic and Indian scholars. In his book Liber Abaci (Book of Calculation) he gave European scholars their first look at Arabic numerals and changed the face of modern mathematics.

  • The Golden Ratio states that two numbers are in Golden Ratio when their ratio is equal to their sum divided by their maximum. This ratio is inherent in nature and has been used by artists, sculptors and architects for centuries to lay out visually appealing works.

The Golden Ratio

Fibonacci, The Golden Ratio And Binary Options

The Fibonacci Sequence, which is based on the Golden Ratio, has been used to measure the financial markets for decades if not centuries. There are several ways to apply Fibonacci theory to technical analysis but the best and most useful for binary traders is the Retracements. The Fibonacci Retracement tool measures a trend, either up or down, and then produces a series of support/resistance targets for pullbacks, corrections and relief rallies. The tool is incredibly useful and eerily accurate at predicting where prices may either reverse or break through.

  • Fibonacci Levels are great places to make short term trends. When prices reach a retracement level a contrarian short term option play can be made. For example on the chart above prices reach a top in mid May and begin to retrace. In early June prices reach the first retracement level and bounce up. A call option with 4 hours to 2 days of expiration would have profited from the Fibonacci bounce.

It is important to note that Fibonacci levels and indicators are not indicators of direction. It takes other analysis to determine where prices are heading. However, once prices bounce from or break through a Fib level the next level becomes the new target. In order to use the tool there must be a clear trend. It can be an uptrend or a down trend but it must be present. Start the measurement from the lowest point of the first candle in an uptrend or the highest point of the first candle in a down trend. End the measurement at the highest point of the last candle of an up trend or the lowest point of the last candle of a down trend. Once the measurement is taken the tool will automatically display the Fibonacci Retracement levels.

  • Click here for more on Fibonacci Retracements for binary options.

High Low Moving Average Channel Indicator

Moving Averages

Moving averages are an important means of technical analysis. They can be created using a number of different data points but are most often created by closing prices. Other moving averages may be created by using high prices, opening prices, low prices or an average or combination of any of these. Moving averages can be any length but the longer the period the better. Short term moving averages like 30 bar, 20 bar or 10 bars are good for short term trading and speculation while longer term averages like the 100, 150 or 300 day moving average are more suited to investors.

  • The High Low Moving Average Indicator uses two moving averages to create a channel. One is calculated from the daily high prices, the other from daily low prices.

High Low Moving Average Indicator For Binary Options

Moving averages are a well known and well respected form of technical analysis. Envelopes and channels are another. This indicator combines both theories into one tool, providing an indicator with the power of two. First, the indicator is trend following, and trend confirming. When the channle is moving up the trend is up and when it is moving down the trend is down. The indicator is also useful as a volatility indicator as well. When price action heats up and daily trading ranges get larger the two lines of the indicator will move apart as well. Times when volatility increases are often good entry points for binary traders.

Signals are best when generated in line with the prevailing trend. When the trend is up and prices retreat below the lower average it is a signal to buy calls. When the trend is down and prices climb above the upper average then it is time to buy puts.Trend following signals are the strongest and have the least amount of risk. On the chart above there are three good trend following signals, each with an outlook of at least one month. There are also numerous shorter term signals as well.

Each moving average also provides an extreme limit. When prices are outside the lines they can be considered to be at a near term extreme and likely to snap back during the next period. Signals of this nature in line with the trend are better than those that aren’t. It is possible to use the contrarian signal, just keep expirations short. On charts of daily prices as shown above I would stick to one day or less. Trend following signals may be valid for positions lasting up to a week or two.

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Which Indicator do think is best for binary options trading?

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Comments

jcme

You are the best bro.

Justin Delano

6 years ago from Everett

Thanks. Very helpful hub here.

TMHughes

6 years ago from Asheville, NC

For that you may need to visit my other hubs!

shamsAlAriyaf

Excellent hub, except it lacked a crucial element: defining what binary options are!

Devika Primić

6 years ago from Dubrovnik, Croatia

Informative ,helpful and well explained.

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Start Trading Binary Options with Fibonacci Tool now!

Not long ago, I explained the Martingale system traders can use her at Option Robot. Actually, there are 2 other trading systems that can be used besides the Martingale system. They are the Classic and the Fibonacci systems.

In this post, I am going to explain the Fibonacci system. The idea is to educate you on these binary options trading systems that Option Robot utilizes.

Keep in mind that Option Robot does not choose the system; that decision is up to the trader, along with some other decisions such as the signal services used, and the amount of each trade.

Origins Of The Fibonacci System

The Fibonacci system, or sequence goes back for many years. It all started with an Italian mathematician by the name of Leonardo Fibonacci. He developed a number pattern that can be used to describe some of the most “perfect” items in nature. Flower petals have a Fibonacci sequence, as do the hairs on a porcupine.

To keep from getting too technical, the Fibonacci sequence simply works on the basis of numbers summed with each other. The basic Fibonacci sequence is: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233.

If you study closely, 1+1=2 (the 3rd number), 13+21=34 (the 9th number), etc…

So, how does this work with binary options and Option Robot?

How The Fibonacci System Works In Binary Options

Both gamblers and traders in binary options have found great success and accuracy using the Fibonacci sequence. In gambling, we will look at someone playing roulette. The wager is $1 on black and the wheel spins red, so the gambler follows the sequence and again bets $1 on black. If it loses again, he bets $2, and follows the sequence until he wins. Win he wins, he drops 2 numbers back in the Fibonacci sequence and resumes betting. So, if black finally hits when he bets $13, he will bet $5 on the next spin. He moves forward 1 spot in the sequence on losses, and 2 spots back on wins.

Now, this is basically the same system Option Robot uses when an investor chooses to use the Fibonacci system. We will use the U.S. dollar and the Australian dollar. The Robot puts $20 on the call and it doesn’t hit, so it puts another $20 on call and it does win. This means the Robot will start at square 1 with $20 again, and it will follow the same basic idea as the roulette example…wins move down 2 places and losses move up in the sequence 1 place.

Conclusion

When you take a look at the Fibonacci system in binary options, you will discover it to be considered the most accurate system used, especially when used with currency pairs.

Keep in mind that at Option Robot, you do have the 3 various systems, and you set the system you want the Option Robot to use for your trades.

If you have any questions about the Fibonacci system used here at Option Robot, feel free to ask. Remember that no system is 100% perfect, so be wise. But, you did make a wise choice when you decided to make Option Robot your preferred binary options automated trading system.

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