Binary options strategy Tunnel Trade is one of the most simple, but nevertheless quite effective trading strategies. The basis of the strategy is the use of moving averages that give trading signals crossing each other.
The strategy can be applied to any trading instrument of binary options. With regard to the time scale, it is better to work on the hourly graphs while using this strategy.
There are several options of indicators that may be used in this trading system. For example, you can use a few exponential moving averages. The period of such a curve may equal eighteen. Another moving average, which can be used as part of the strategy, can be a weighted one. For this strategy a trader can set the period of the curve which is equal to five. A trader can use in this strategy two exponential and two weighted moving averages, the second will be, respectively, with the periods of twenty-eight and twenty-one.
The moving averages, which periods equal twenty-one and twenty-eight form a kind of corridor. This range will indicate the beginning and the end of the movement. As for the weighted moving, they point out, when you can buy a Put option or a Call option. Also, using the binary option indicator Weighted Moving Average, one can determine the strength of the current market movement. In the strategy, there are certain rules that help to interpret the trading signals. To buy binary options, you need to see the curves intersect and form a relatively narrow range.
If the moving averages cross upwards, herewith, such intersection occurs at the price curve on the graph, you can buy a Call option. A very strong signal to buy a Call option is the intersection of the shorter weighted moving average and a longer one.
If the market starts downward movement, the trader should buy a Put option. In this case, the range will be narrowed either and the intersection of the indicators’ curves will occur, only this time downwards. A constriction itself will occur above the graph of the trading instrument.
In both cases, to make the signal stronger, it is necessary to wait for closing the candle. In the Tunnel Trade binary option strategy you can also use an indicator Relative Strength Index. This indicator can also confirm the signals to buy a Put or a Call option excellently. The use of this indicator in the strategy is quite simple. If the moving averages turned downwards and crossed, the signal to buy a Put option is applied. In this case, if the indicator RSI crosses the level fifty top-down, a signal to buy a Put option can be considered confirmed.
When the moving averages crosses below and then move upwards, a signal to buy a Call option appears. In this case a trader also needs to pay attention to the behavior of the indicator RSI. If the curve of the indicator crosses the midline from the bottom up, a signal to buy a Call option is confirmed. As can be seen, the strategy is really very simple, but effective. It can be used both by the beginners and experienced traders.
That’s all for now. Got any questions? Just ask the expert!