It is not very difficult to devise a binary options trading strategy if you have had some previous experience in trading currencies, commodities and stock indices. These are the same assets that are encountered in the binary options market. So if you can devise a forex trading strategy to trade any of these other assets, you can modify such a strategy for use in the binary options market. In addition, special care must be taken to devise a system for setting expiry times and dates accurately.
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The MBFX trading system was originally devised by Mostafa Belkhayate for the forex markets. However, the strategy can be used in the binary options market. The basic principle of the MBFX trading system is being able to detect potential market tops and bottoms, so as to sell at the tops and buy at the bottoms. The strategy can be used on most currency pairs and on most time frames. The best results are seen on the 4hour time frame.
Setting Up the Strategy
The MBFX strategy requires the following for implementation:
- The MT4 forex platform
- The MBFX Timing Indicator
- The Currency Strength Meter (which indicates the strongest and weakest currencies to trade with this strategy)
Applying the MBFX as a Binary Options Strategy
The MBFX strategy works by a colour indicator provided by the MBFX Timing Indicator. This indicator provides three colours to signal traders on what direction to trade:
- Red – for sell
- Green – for buy
- Yellow – for sell or buy, depending on the market condition and the preceding trend
The indicator is displayed line in an indicator window below the charts. The currency strength meter shows several lines that correspond to support and resistance pivot points. After applying the currency meter to the chart, check to see if the currency asset touches the green lines and the red lines on the chart and also check to see if they return to the blue line in the middle. Only currency pairs that can do this should be traded with the MBFX system.
A buy signal for the MBFX strategy is a call to the trader to purchase the Rise, Up, Above or Call options, which are bullish-based binary options bet contracts. It is up to the trader to make the call according to the nomenclature on his binary options platform. The buy signal occurs when the price action of the asset touches the green lines on the chart, and the MBFX Timing Indicator turns from red to yellow or green. It may be preferable to use the yellow colour change as the trade entry signal since it is the earliest you can get in, but a change from yellow to green gives the most secure signals.
For sell signals, we will be looking for the price action of the asset to touch the red lines on the chart, and for the timing indicator to change colour from green to yellow or from yellow to red. This will now be a call to the trader to initiate a Put, Fall, Down or Below call option, depending on the nomenclature of this contract on the binary options platform.
Expiry times will depend on the time frame used for the trade analysis. If you are using a 4hr or daily chart, your expiry must be at least 2-5 days to ensure your trade enters and stays in the money.