5-Minute Binary Options Strategy on Pocket Option
There are a lot of trading strategies that traders use these days. Some strategies rely on certain indicators, candlestick patterns, moving averages, oscillators, and so on. While these things can indeed provide you with a better view of what’s happening on a chart, and the possible future of the market, you’ll have to make sure that you’re using the right combination of tools and indicators. Having too many indicators and tools on a chart creates too much noise and creates confusion that makes trading decisions inaccurate. When it comes to the right combination of tools and indicators, going with just a few makes charts much easier to read. Among the easy-to-read and interpret strategies today is the 5-minute trading strategy for Binary Options trading. It only makes use of two indicators on the chart – the RSI and the EMA. Check out all the details about this strategy and find out if it’s the strategy you need to be an effective trader.
What is the 5-Minute Binary Options Strategy?
The 5-Minute Binary Options Strategy is a strategy used mostly by scalpers or day traders. This is for the reason that it makes use of a short frame. While it’s using a fast time frame, it also offers the fastest rate of return for successful trades. Although this strategy aims for positive results in the 5-minute time frame, it can also be used on lesser time frames such as 2-minute timeframe, or 1-minute timeframe.
This strategy uses the RSI14 as an oscillator and the EMA200 as a measuring indicator for the price. As an additional confirmation for the direction of the price, this strategy also incorporates the engulfing pattern. The strategy assumes that whenever a price is above the EMA200 with RSI that is close to 70, with a bullish engulfing candlestick pattern, the next direction would be upward. On the other hand, this strategy also assumes that whenever the price is below the EMA200, with RSI close to 30 while having a bearish engulfing candlestick pattern, the price is expected to move in a downward direction. Of course, there will also be other factors involved in this strategy such as the volatility of a stock, fundamentals, and other factors. Nevertheless, more and more traders are incorporating this strategy in the system due to its good win rate.
How it works
First of all, the time frame should be no more than 5 minutes. To set the time frame on Pocket Option, simply choose the candlestick pattern icon on the upper left corner of the trading dashboard – next to the asset code. Choose M5 for 5 minutes, M3 for 3 minutes, and so on. The time of expiration for every trade should also match the chosen time frame. To set the time for expiration for every trade, go to the right corner of the trading dashboard and set the time.
After setting the time frame and expiration, establish RSI and EMA the indicators on the chart. To do this, simply open the dropdown menu from the upper left corner of the dashboard (as shown by the arrow on the image) and choose RSI and Moving average. For the RSI setting, choose 14 for the period, and establish 30, 50, and 70 lines through the style settings. For the Moving average settings, use 200, and choose EMA for the type of Moving Average. Both indicator settings can be changed by clicking the pen icon near its name.
With the indicators and the time settings set in place, the next step is to start searching for stocks or assets that match the requirements. For a bullish setup for this strategy, choose an asset that has candles found above the EMA200, and an RSI that is above or at the 50 RSI line. On the other hand, a bearish setup using this strategy requires that the candles should be located below the EMA200, and its RSI should be below or at the 50 RSI line.
At the same time, the latest candle should have an engulfing pattern. A bearish setup should show a bearish engulfing pattern, and a bullish setup should show a bullish engulfing pattern.
On actual charts
Now let’s see how this strategy is used on an actual chart. First, let us consider a bullish setup of this strategy.
This example is for the Forex currency CAD/JPY. All conditions are met in this chart, the RSI is above the 50 lines, the candles are found above the EMA200 showing that the trend is an uptrend. Finally, the appearance of a bullish engulfing pattern is found in the price movement. Ideal entry would be at a level above the bullish engulfing pattern as shown by the yellow arrow.
For the bearish setup of this strategy, let us consider the Forex currency EUR/USD. In this example, there are two instances of this strategy being implemented. We can also see here that all conditions are met, wherein the candles formed below the EMA200, RSI is below 50, and the formation of bearish candles. Ideal entry for short trades or sell points would be at a level below the pattern. One thing that we can note here is that these formations can occur multiple times on a chart. As we have observed, the price direction has been predicted accurately.
Now that we understand that this strategy takes advantage of strong trends and assumes the direction of the price with the direction of the trend. However, how do you know when to stop, or when the trend starts to move the other way? A good way to assume reversal is to consider the movement of the candles. In this regard, thinning candles or candles with small bodies are good indicators that show a weakened trend. At this point, whenever consolidation or thinning of candles occurs on a strong trend, it would be time to take a break using this strategy as it would pose high risks.
Our Final Thoughts
This strategy is quite easy to use because of the minimal indicators and patterns set in place. There is a huge possibility of winning a trade provided that all conditions are met using the specified timeframe. Probably, the only downside to this strategy is the trader’s ability to react quickly to price changes. Since it makes use of a fast time frame, the trader needs to have a good eye and experience when it comes to evaluating price movements and candle patterns.
To fully master this strategy and to perform better in trading, make sure to practice the basics – and that is identifying strong trends by simply looking at the price movement or through the MA200. Pocket Option comes with a demo account where you can conveniently put this strategy into practice.
If you want to know more strategies that can help you become a better trader, check out our page for a list of strategies, as well as tips and hints to become better a better trader. For comments and suggestions, please fill out the form below.
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