Beginners’ Strategies Support & Resistance Strategy Triangle Breakout Strategy Intermediate Strategies  The Flag & Pennant Trading Strategy Advanced Strategies The Fibonacci Binary Trading Strategy The RSI & Stochastic Binary Trading Strategy

1. Chapter 9:
In Depth Trading
Strategies and Tactics
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IN DEPTH BINARY TRADING STRATEGIES & TACTICS
As we have learnt from previous chapters, when
trading binaries, there are 2 important aspects that
must never be disregarded. First, we must have in
hand all the necessary information about the
market before we can act. Special attention must be
paid to any news that can affect the market and
analysis of factors which directly and indirectly
influence the price movements of the underlying
assets. Second, we must have a solid well thought
out plan on how to execute our investment
decisions, in other words a trading strategy.

3. In this chapter, to help you start off on your binary trading journey, we will have an overview of 6 of the more
popular binary trading strategies commonly used by beginners, intermediate traders and advanced traders.
BEGINNERS’ STRATEGIES
SUPPORT & RESISTANCE STRATEGY
The idea behind this strategy is simple. Since markets are prone to fluctuations, opportunities to profit from these
fluctuations are abound if traders are able to identify the areas of price support and resistance. Because of the
simplicity of this trading strategy, it is ideal for beginner traders wanting to trade Up/Down (Call/Put) binaries.
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4. IMPLEMENTING THE STRATEGY
This strategy assumes beforehand that you are able to read price charts and have some basic understanding about technical analysis. A
basic level of technical analysis is necessary if you are to be able to identify areas of support and resistance on your price charts. To recap
what we have learnt in earlier chapters about support and resistance levels:
“The resistance level is defined as a price level or price range when current prices are having difficulties in breaching upwards. Conversely,
the support level is the price level or price range which current prices are finding it difficult to drop under”.
Based on the definition of support and resistance above, this mean when prices are near the resistance level, the upward momentum of
prices is presumed to be weakening and hence we should brace ourselves for falling prices soon. In this scenario, we should be
purchasing put options. On the other hand when prices are near the support level, this mean we can expect prices to rise soon hence we
should be purchasing call options.
The beauty of the Support and resistance strategy is its simplicity and flexibility as it is easy to understand and can be applied to any
markets.
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5. TRIANGLE BREAKOUT STRATEGY
Moving on from the support and resistance strategy, we have a slightly more complex strategy to work with called the Triangle Breakout
strategy. The triangle breakout strategy takes the support and resistance strategy one step further by isolating instances where prices
converge to form a triangle pattern on the price charts. Again, this strategy presumes that you are able to read price charts and have
some prior knowledge about technical analysis.
TRIANGLE PATTERNS
Triangle patterns formed on price charts can be one of three types of shapes, symmetrical, ascending and descending.
SYMMETRICAL TRIANGLE
This chart pattern is formed as a result of indecision in the market. The tug of war between demand and supply ultimately causes the
highs and lows of the asset’s price to converge together and hence forming this pattern. Analysts generally regard the symmetrical
triangle as a period of price consolidation just before prices breaks out to move uptrend or downtrend.
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6. So how do you take advantage of such a scenario since this is a neutral pattern? The answer is simple. You purchase a call option above
the slope of the lower highs and a put option below the slope of the higher lows. Hence, regardless of which direction prices are
heading, we will be able to hitch a ride in either direction.
As soon as prices hit the first order, place another order in the same direction as the first hit order in order to maximize the breakout.
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7. ASCENDING TRIANGLE
The ascending triangle pattern is depicted by a horizontal tread line at the top and an ascending trend line at the
bottom. It is formed when we see a series of higher lows rising against a resistance line. The implication of this
pattern is that the buyers in the market are gathering strength through the series of higher lows against the
resistance in prices. Sooner or later a breakout is going to occur. So which direction will prices go? Normally, prices
will be on the uptrend since buying pressures are forcing the closing prices up however it is entirely possible that
prices can go the other way.
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8. So if we expect prices to be on the uptrend,
our course of action is to purchase a call option
at or slightly above the resistance level.
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9. DESCENDING TRIANGLE
Opposite to the ascending triangle, we have the descending triangle characterized by downward sloping
trend line converging against a horizontal support level. This pattern is formed when selling pressure in the
market is slowly gained ground against demand forces.
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10. As selling pressure is forcing the opening prices down, it is highly likely that prices will break out in a downward
trend. Again as before, we need to stress it is entirely possible to swing upwards right after the breakout. Nothing is
for certain in the world of financial trading. As Benjamin Franklin said, the only certainties in life are Death and
Taxes. Anyway coming back to our topic of descending triangles, since we are expecting that price will fall, the
prudent action to take is to purchase a put option at or slightly below the support level as shown in the figure below.
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11. INTERMEDIATE STRATEGIES
For those who mastered the binary trading at the beginner’s level mentioned above, it is time
to move on to more sophisticated trading strategies. The following two strategies that we are
going to cover in the next section are classified as intermediate binary trading strategies suited
to those who already have some prior trading experiences.
THE FLAG & PENNANT TRADING STRATEGY
The Flag & Pennant trading strategy is actually an extension of the triangle strategy that we
have discussed earlier in the preceding section above. Hence, the concept behind these two
trading strategies is quite similar in application.
THE FLAG PATTERN STRATEGY
The flag pattern is a short term pattern lasting 1 to 12 weeks and is depicted as two short
sloping parallel trend lines that resemble a flag flying on a flag pole.
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CHARACTERISTICS OF THE FLAG PATTERNS
Flag patterns have the following characteristics in them:
• THE FLAG
The flag is a small rectangular shape slopes against the prior trend. If the prior trend is an
uptrend, then the flag will slope downwards. Conversely, if the prior trend is a down trend,
then the flag will slope upwards making it look like an inverted flag.
• THE FLAG POLE
The flag pole covers the distance from the first breach in the support or resistance level to
the high/low of the flag. As a result of a sharp rally or fall in prices, the flag pole will breach
either a trend line or the support/resistance level. It is from this breach to the high or low of
the flag that will become the flag pole.
• TARGETS
The target is actually the opposite of the flag pole. By taking the length of the flag pole and
applying that length to breakout point in the resistance or support level, one can roughly
estimate the extend of the advance or decline in prices.

13. So depending on how the flag is positioned, it can be regarded as a bullish
flag or bearish flag. The figure below shows what a bull and bear flag will look
like on a price chart.
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14. SIGNIFICANCE OF THE FLAG PATTERN
Flag patterns represent brief periods of price consolidation which is denoted by the region between the parallel trend
lines. In laymen terms, the market is taking a ‘short break” before continuing its trend upwards or downwards. For
traders, this represents another good prospect for them to enter or re-enter a market which is trending. When a flag
forms during an uptrend, a breach in the resistance line is seen as a resumption of the uptrend. On the other hand, if a
flag forms during a downtrend, a beach of the support line is taken to signify a resumption of a downtrend.
TRADING THE FLAG PATTERN
By now you should be able to see that by the way how the flag is sloped, we can determine which direction the market
will go. This in turn will decide if we purchase a Call (Bullish flag) or a Put (Bearish Flag). Use the target length as a guide
for the range of maximum strike prices that you can work with as shown in the example below.
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15. THE PENNANT PATTERN
While flags are chart patterns that resulted from prices being confined within two parallel sloping trend lines, pennants
are comes from prices being confined within a symmetrical triangle. The pattern got its name because the shape of the
pattern actually resembles a shape of a pennant flag which comes about as a result of a downward sloping resistance
line converging with an upward sloping support line.
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16. SIGNIFICANCE OF THE PENNANT PATTERN
Pennant patterns are continuation patterns that form as a result of a slight increase in pressure on the forces of demand or supply. It is
characterized by a sharp rise or fall in prices, then followed a period of consolidation until the support and resistance levels converged. After
convergence, this will be followed by a breakout in prices that follows the same direction as the 2nd half of the flag pole. In essence,
pennants are just what we call “halting station”. Prices are basically just ranging and the trend does not reverse into the opposite direction.
For an up trending market, as prices approach the resistance or target region, there is increased pressure from the supply side which halts
any further rise in prices. The converse is true for a down trending market. Increased pressure from the demand side helps to arrest further
decline in prices.
TRADING THE PENNANT PATTERN
Since pennant patterns signify a “break” in a trend, they actually present an excellent opportunity for traders to position themselves for the
breakout in prices. For bullish pennants, purchase Calls just above the resistance level near the tapered end of the pennant pattern. For
bearish pennants, purchase Puts just below the support level at the tapered end of the pennant.
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17. ADVANCED STRATEGIES
In order to be really successful in binary trading, we mustn’t stick to just one trading concept. Instead, we must
broaden our knowledge so we can have at our disposal various trading strategies that we can use to maximize
our profitable opportunities. In this section, we will dwell deeper into the world of technical analysis so we can
learn to utilize some of the technical indicators that will give us an added edge in the markets. In order to use
the following strategies discussed below, you need to have access to more complex charts that are normally
provided by dedicated spot forex trading platform.
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THE FIBONACCI BINARY TRADING STRATEGY
Of the lesser used technical tools, the Fibonacci
binary trading strategy is an ideal trading strategy
for binary traders looking to trade short term
binaries. The strategy is based on the famous
mathematical sequence of numbers known by the
person who developed it, Leonardo Fibonacci.

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THE FIBONACCI SEQUENCE
The Fibonacci sequence starts from zero
and 1. The next proceeding number in the
sequence is derived by adding the
preceding two numbers in the sequence.
For example, starting from 0 and 1, the
third number in the sequence will also be
1 (0+1 =1). Moving onwards, the fourth
number will then be 2 (1+1 =2). The fifth
number in the sequence will then be 3
(1+2 = 3) and so forth. In the end, we will
end with a sequence like the one shown
below:
0,1,1,2,3,5,8,13,21...

19. THE FIBONACCI BINARY TRADING STRATEGY
Of the lesser used technical tools, the Fibonacci binary trading strategy is an ideal trading strategy for binary traders
looking to trade short term binaries. The strategy is based on the famous mathematical sequence of numbers known
by the person who developed it, Leonardo Fibonacci.
The concept behind the Fibonacci retracement is that if market prices were to advance or retreat, they will move
roughly in accordance with percentages stated above.
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20. TRADING THE STRATEGY
Using the Fibonacci retracement levels as alert zones, the key level to monitor will be the 50.0% and 61.8% retracement levels. The idea
behind the Fibonacci strategy is to identify a trend and where its pullbacks (retracements) will be. Once identified, you can then enter the
market with a call or put option depending on whether the trend is trending upwards or downwards.
DRAWING THE FIBONACCI LINES
In order to get the correct placement of the Fibonacci levels, you need to draw the lines in the direction of the trend. For an up trending
market, the lines start from the lowest point of the trend to its highest and vice versa for a down trending market. For example, in the
figure, we can see prices advancing from its low breaching the 38.2% level and tapering off around the 50.0% level. So had you purchased
a call option with the strike price around at the 38.2% level to 50.0% level, your trade would have ended up in the money.
One of the reasons why we recommended this strategy for the advanced level is due to the fact that it works best in a highly volatile
market like the forex market. Nevertheless, we still advise that you get practice first with this strategy before you try it on live trading.
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21. THE RSI & STOCHASTIC BINARY TRADING STRATEGY
This combination strategy uses the Relative Strength Index (RSI) and Stochastic indicator to help provide traders with
an analysis of a pair of time frames in addition to providing them with trade signals. The main purpose of the strategy
is to identify the prevailing trend so traders can trade along with it before it runs out of steam.
We like to stress that this strategy is not for beginners as they might difficulties digesting this concept of this strategy
as well as trying to track down the ideal market entry point.
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22. SETTING UP THE CHARTS
Before all else, you need to ensure that your charts are properly set up. Begin by selecting 2 different charts with 5 minutes and 15 minutes
time frame respectively. The chart with the 15 minutes time frame will be used for identifying the prevailing trend while the chart with the
shorter time frame (5 minutes) will be used for identifying the ideal entry point. Use exponential moving averages (EMAs) with the values of
5, 21 and 50.
Next, plot out the support and resistance level according to your own estimation. To make sure that the RSI is able to identify the best entry
possible point, adjust the 15 minutes chart to a setting of 4 bars. Take note, while the 5 minutes chart is the actual chart used for
pinpointing the entry point, we still want to see the trend within the scope of the 15 minutes chart and hence the setting of 4 bars. Although
the use of the stochastic indicator is actually optional, it never hurts to have another indicator to confirm your trading signals.
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23. EXECUTING THE STRATEGY
Start by checking the 15 minutes chart to see to if the value of the underlying asset is within the
range of the support or resistance levels. Take note of the exponential moving averages (EMAs) to
ensure that the prevailing trend is established. From this, we look at the shorter term EMA as see
if it is higher than the longer term (50 bar level) EMA. If it is the case, this mean the trend is
ascending. If the MA is below the 50 bar level, this mean the trend is descending.
The next step is to wait for the trade signal. This is when the RSI has moved into overbought or
oversold conditions. Once this has happened, check you 5 minutes chart and look out for the entry
signal. Once prices are near the areas of support or resistance, wait and see if price move beyond
these levels. To reconfirm the trade signal, use the stochastic indicator.
As mentioned earlier, this strategy is meant for advanced traders as it presupposes that they are
already familiar with what the RSI and stochastic does. So if you are having difficulty with this
strategy, you need to brush up on your knowledge of technical analysis.
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