Trading binary options can be an immensely profitable undertaking, but it can also be rather risky, as losing large amounts of money is indeed a distinct possibility that traders stare down each and every day. The difference between the winners and losers is made by the systems/strategies they use, the way they apply them and the way they manage their trading bankrolls.
The Triangle Touch strategy is a low-risk system that beginners will be glad to embrace, because it’s also an easy-to-understand one. The reason I’m calling it a low-risk system is because it’s a seasoned war-horse, which has proven its worth in other markets. What I’m about to detail below is essentially its adaptation to binary options trading, specifically to the trading of the Touch/No Touch contract.
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Before we go into the strategy itself though, we need to define and clear a few basic concepts about it. The Triangle Touch strategy is a chart-pattern based strategy, using patterns called triangles, of which there are two basic types: ascending and descending ones. Ascending triangles are formed by price action candle sticks which have lows that are gradually getting higher and higher, while their highs remain at the same level. Such triangles define a horizontal resistance and a sloping support line, which converge to create the triangle pattern. Such triangles mean that an upward (bullish) price breakout is in the books.
The candle sticks which form the descending triangles have a flat bottom, in the sense that their successive lows stick to the same support level, while their highs get lower and lower, creating a downward-sloping resistance line. Such patterns mean that a downward prize-breakout is bound to happen.
Understanding the way these patterns work makes the placing of the Touch/No Touch trade quite easy. In fact, the difficult part of the strategy is the correct identification of the above said patterns. Once that is done, the rest slips into place almost of its own accord.
In the case of an ascending triangle, the price will usually go (at least) as high as the first pivot point of the automatic pivot point calculator, so that’s a good point of reference. The Touch trade should therefore be placed 20-30 pips above the horizontal resistance line of the triangle pattern.
The No Touch trade obviously goes below the support line, with a more generous expiry than the Touch trade. The actual expiry times depend greatly on the time frame used for analysis.
The strategy works in a similar way with descending triangles, with the difference that everything goes into reverse, since the price breakout we’re looking to exploit is a downward one.
The Triangle Touch strategy should always be put to the test risk-free, preferably through a demo account, before employing it for real money trades.