This binary options strategy relies solely on the use of the CCI indicator. This indicator is provided within most technical charts, but traders will have to have access to a chart that provides it in order to use this strategy. Although this method is rather simple, some previous experience with technical analysis will certainly be a plus. The drawbacks are minimal when employing this strategy, but proper use will be a must so as to avoid any problems.
The CCI indicator has been around for quite some time, being applied in various forms of trading for over 30 years. Over that time, changes have been made and the indicator used today is quite different from the original. In many ways, it is more effective, and the primary use remains the same. Its primary benefit will be that of helping traders to identify a price trend, while limiting market noise that could lead to inaccurate price movement forecasts.
The questions that must be answered by all who trade binary options will be, what is the upcoming direction of movement and for how long will the price move in that direction? Use of the commodity channel index can help to provide those answers. The CCI includes only one line, which makes it easy to read. This line will oscillate, showing values between (or sometimes at) 200. Trends, and trend strength, will be revealed by comparing the asset price to its current value level.
The reading is quite simple. A price trend moving upward is noted when the price exceeds (or moves above) +100. The opposite applies for a downward trend, which would be noted at the -100 level. This range provides enough space to provide a clear entry signal, limiting market noise and clearly showing the direction of price movement. Some previous experience with indicators will be helpful, but new traders can easily learn to use this binary options strategy with just a bit of practice.
What are the drawbacks? The main issue would be the fact that patience is required and fast action will need to be taken when the entry signal arrives. Price movement which exceeds the 100 line (+ or -) does not occur frequently. When those levels are exceeded, the odds of an upcoming price reversal become quite high. As such, a short-term trade will need to be entered into as soon as the entry signal is validated. To be provided with additional preparation time, an additional indicator could be used to highlight the trend before the CCI shows it.
The benefits of this strategy are quite clear. However, single-indicator strategies are never as effective as those which make use of more than one indicator. Should you plan to use this method as-is, consider testing it several times on paper or within a demo platform first to see the results. The wait time and level of patience required may turn some off of this binary options strategy, but it can be quite valuable and should be considered for use when working to identify a price trend to trade along with.