The basis of the Viriato strategy lies in the reversal of the current trend. The basis of this methodology is understanding that absolutely any movement that is happening in the market is not infinite. This leads to the inevitable occurrence of an event when the price starts to make a correction. Its volumes can be very different, including those that ensure the formation of a new trend.
This assigns the task of determining (as accurately as possible) the point where the current movement has exhausted itself. It is important to understand that such an event may occur as in the beginning of motion as well as on its later stages. The present strategy allows to determine the point in time when the market has made a strong pulse movement that has exhausted it. For these purposes, it is assumed to use two types of indicators: trend indicators and oscillators. This combination aimed at identifying trends’ completion time is very effective.
As trading instruments the following ones will be used:
These indicators complement each other perfectly. We will use their basic settings for work, the changes will affect CCI only, reference levels of which we extend to +200 and -200. Below are the basic settings for Viriato strategy.
A distinctive feature of this method of working with binary options is that its application is valid for sufficiently small time frames.
As we work with the definition of the trend depletion, we need to identify the overbought and oversold zones of the market, which will be strong boundaries of price movement. Below is a table that uniquely defines these levels:
|Overbought zone||70-100||above +200|
|Oversold zone||0-30||below -200|
In fact, it already allows you to create rules for trade. So, if both instruments are in oversold range, we can talk about buying a binary option for the rise. Note that you must buy a lot for 5 calculated levels, which in our case are 25 minutes. This parameter is calculated as follows. If the analyzed time frame equals 5 minutes, then the expiration of the option is 5 * 5 = 25 minutes. Accordingly, if the time frame is 30 minutes, the expiration will equal 30 * 5 = 150 minutes.
A common mistake of many novice traders who fall into the hands of Viriato strategy is the start of trading in so-called frontier points. The correct trade is based on an explicit finding of both indicators in selected critical ranges. If the intersection is not clear, then it is recommended to abstain from the purchase of a binary option.
To buy a binary option for a decrease, respectively, it is necessary at the time when Viriato tools are ranging oversold. Again, you must wait for an explicit lowering of both indicators, and only then buy the lot.
The main trade rules do not change. The expiration of the lot is 25 minutes.
In the end, we can talk about Viriato strategy as about a system capable to provide lucrative binary option trade on medium-term distances. It can be effectively applied in long-term trading either, but this is not its main purpose. During the trade a trader should remember about a clear definition of expiration, as well as about the ability to wait for an explicit lowering of indicators in the desired range.
That’s all for now. Got any questions? Just ask the expert!