THE HOT WINDOW
Binary Options Trading Strategy for the EUR/USD
So the Euro Dollar exchange rate is something a lot of traders pay attention to daily. Some traders use it as an indicator to see how well the Dollar is doing against the Euro or vise versa. Or, generally speaking, to see the daily value of the currencies after economic events like government spending, etc. come into fruition for the issuer of the currency. A binary options trade for the Euro Dollar exchange rate is interesting in the sense that there is a lot of volatility or movement in the price daily, which can make a trader really wonder 'what direction will the price move towards today?
The exciting part of the constant price fluctuation is that it gives a trader ample opportunity to generate profit from the constant price movement. However, a trader should be aware that it is easy to make many wrong predictions when trading these two currencies against each other, and can cause consecutive losses easily. In this Tip, we're going to try to give you some strategy when trading the EUR/USD.
First of all, you should consider trading the EUR/USD in both short term periods, and long term periods – trade options with expiry times longer than 1 day. The purpose of trading long term options with the EUR/USD, is that it gives you the ability to trade based on trends you identify by reading news, and observing current events. When you first start trading the these currencies, news and current events, along with the price of the EUR/USD in the last 30 days will help you know the direction the price is going in. These are the two most used currencies in the world, and as a new trader, it's easy to find news articled from reliable investment and finance sources that will give you direction in learning about these currencies, and eventual trade predictions.
If you're just starting out, it's very important to learn how to read charts specific to currencies. Unfortunately, many binary options brokers don't offer the charts with the indicators needed to identify trends. Since the EUR/USD is traded on Forex, you can download the MT4 platform from Forex.com or other sources which will give you the charts you need.
So here are the important parts to learn:
MACD or Moving Average Convergence Divergence is used to determine the difference between two exponential moving averages. Or to simplify its meaning, the MACD is used to identify momentum behind an assets price.
The MACD is made up of a set of horizontal lines, the first starting at zero, and the other lines move forward to identify the difference between a slow moving average and a fast moving average. There's a lot of information available on the internet about MACD and how to read it correctly on a chart, and we encourage you to get familiar with being able to read it comfortably on a chart. Traders use the 26 day period and the 12 day period EMA for the moving average, and the 9 day period as the trigger, but as you become more familiar with the MACD of a currency, this formula can be adjusted to better suit your trade.
On the chart below, see the MACD in blue vertical lines below the price action.
Parabolic SAR or Parabolic Stop and Reverse is identified through a set of dots on a chart in areas where the price has a potential to reverse. It is based on a formula that''s technical, and if you're interested in the details, you can search the internet for Parabolic SAR to learn exactly equation using this formula is put together.
The Parabolic SAR basically helps to identify when a trend begins, and when a trend ends. Take a look at the chart below, and try to see Parabolic SAR is trying to show you.
Price movement upwards: There are two things we look for to see if the price of the EUR USD is going to go north. (1) The Parabolic SAR indicates a buying signal. This usually happens when the Parabolic SAR appears below the price in action on the chart. (2) The MACD lines move from negative to positive.
Price movement downwards: There are two things we look for to see if the price of the EUR USD is going to go south. (1) The Parabolic SAR indicates a selling signal. This usually happens when the Parabolic SAR appears above the price in action on the chart. (2) The MACD lines move from positive to negative.
Overtime your experience in trading these currencies will contribute to your success in price predictions and sharpening your chart reading knowledge, leading to more time accurate trades. Use this strategy to get the hang of things and stay tuned for future strategies and tips.