What’s your strategy for making the most out of your trades on Binomo? Have you heard about the 3 candles strategy?
For many traders, having a strategy is a great way to earn money consistently. However, a lot of traders make the mistake of thinking that complicated strategies work better than simple strategies. Most believe that simple strategies are way too simple to be effective.
Contrary to popular belief though, I learned from experience that sometimes, the simplest strategies can turn out to be the best strategies. I’ve got two reasons for this:
- Relying on too many indicators to figure out the perfect trade entry point can be confusing.
- Keeping an eye out on different indicators can distract you from your main goal, which is making money.
One of my favorite simple trading strategies that actually work is the rule of 3 candles.
What is the rule of 3 candles strategy?
The first thing you have to know about the rule of 3 candles is that it requires you to use a candle chart. If you’re used to other kinds of charts, like the line chart or the area chart, you should probably read up on candle charts first before attempting this strategy.
Thankfully, the rule of 3 candles strategy isn’t difficult even for beginner traders.
To say it simply, you only need to find 3 consecutive same-colored candles in order to implement this strategy properly. These candles are typically full-bodied candles, or candles with relatively short shadows that appear consecutively on the chart.
Why do we only use full-bodied candles? That’s because full-bodied candles are a lot more accurate than special candles, which makes the former perfect for the rule of 3 candles strategy.
How do you use this strategy on Binomo?
- Find a trend. It doesn’t matter what trend it is, because this strategy works on both uptrends and downtrends. Just remember that candles should have red bodies on a downtrend and green bodies on an uptrend.
- Identify 3 consecutive same-colored candles. The 3 candles must have the same color. So if the first one was green, the next two should be green as well.
- Trade against the trend. You shouldn’t be trading against the trend normally, but this strategy banks on the tendency of the fourth candle to end up in the opposite color.
Obviously, this strategy isn’t perfect. Its biggest advantage is how easy it is to pull off for beginners, but it also just relies heavily on probability and hence has certain associated risks.
Not that it’s a bad thing, of course, especially in this case. Think about it in terms of a coin toss. Your first toss has a 50/50 chance of getting heads or tails. If you get tails, your second toss will have a lower probability of resulting in another tails around 25%. The third toss will have an even lower probability, at 12.5%.
The more tails you get, the lower the probability of getting another one. At some point, it already becomes relatively safe to hope ‘heads’, because it’s impossible to just keep getting tails forever.
This is the same logic behind the rule of 3 candles. If there are already 3 consecutive candles of the same color, the probability of getting another candle of the same color will be much lower. By going against the trend at this point you stand a higher chance of coming out on top.
How to apply the rule of 3 candles on Binomo
Since you’re working with trends for this strategy, you don’t have to take note of the price while trading. All you have to do is to identify which candles are currently dominating the market, depending on the trend.
Focus only on one candle color and wait until it reaches 3 consecutive sessions. Due to the law of probability, you now know that by the time the candles reach 3 consecutive sessions, there’s already a high chance that you’ll get a green candle for the 4th session.
Just take a look at the real-world example below.
So, where’s the best trade entry point? The best trade entry point when it comes to the rule of 3 candles strategy would be at the end of the 3rd candle, right before the 4th candle develops. If you identify 3 consecutive red candles, you should enter a higher position. If you identify 3 consecutive green candles, you should enter a lower position.
If the trade happens to lose, the strategy requires to still enter the same position as before. Again, the probability becomes lower the more same-colored candles appear consecutively. That said, you should always have a limit on losing, such as if you lose 3 times, you should stop trading for the day.
Tips for trading using the rule of 3 candles on Binomo
One thing to remember before using this strategy is that you should always check the chart’s history first to see if there are any past trends where the rule of 3 candles was applicable.
If there are any upcoming news, events, or announcements that could affect your chosen financial instrument, don’t use this strategy. After all, the rule of 3 candles relies greatly on probability and tendency, so unexpected news or events that could change that would make this strategy fail.
Here are some final reminders:
- Follow candle colors, not prices.
- Trade after the third candle and before the fourth candle.
- Don’t increase your trade amount if you lose your last trade, as the Martingale system suggests. Either you retain the same amount or you stop trading entirely.
What’s your experience using the rule of 3 candles strategy? Feel free to share your thoughts with us in the comments below! And of course, if you haven’t yet, don’t forget to sign up for your free Binomo practice account now!
Good luck on your trading journey with Binomo!