In the intricate world of financial markets, every trader possesses their unique toolkit, a carefully selected set of tools wielded skillfully to generate consistent profits. Interestingly, if you were to poll different experts on their preferred analytical tool for market assessment, a significant proportion would undoubtedly mention the Moving Average.
What’s remarkable about the Moving Average? It is one of the oldest technical analysis tools, yet it remains effective in trading. Many various trading strategies incorporate Moving Averages as a central element, often without any auxiliary indicators. Whether you’re using the Binomo terminal or an alternative platform like live charts or MT4, you’ll find the Moving Average readily available in the Tools List.
Description and Setup for Three Lines
The Three Lines strategy offers a significant advantage, as it can be effectively applied to a wide array of assets: currencies, stocks, commodities, or cryptocurrencies. The choice of the asset is entirely at your discretion.
In terms of chart display, Japanese candlesticks are an ideal choice for implementing this strategy. These candlesticks provide valuable insights into price movements over a selected timeframe, enabling precise contract entry decisions.
This trading thrives on lower time intervals, making it particularly well-suited for binary options. Thus, it’s advisable to set the timeframe within the range of 1 to 15 minutes.
The Three Lines system relies on three exponential moving averages (EMAs), each with distinct periods: 5, 10, and 15. In the example of trading presented below, moving averages with these specified settings are employed, with colors distinguishing them as orange, lilac, and blue, respectively.
The instrument itself, represented by a solid line, derives its value from the average closing prices over a specified period, a parameter set in the indicator’s configuration. In the case of EMA, the current value is further adjusted using a multiplier and an exponent, reducing the indicator’s response lag to current price changes. Thankfully, the era of manual calculations is past, as internet trading has relieved financiers from this once-routine task.
Trading using the “Three Lines” strategy
The core concept of this system is remarkably straightforward: initiate a trade at the intersection of specific lines. While some traders utilize two moving averages for this purpose, this strategy introduces a third moving average to confirm signals and mitigate risks.
The CALL and PUT signals are well-defined, with clear entry criteria that depend on the EMA crossovers. This three-tiered confirmation mechanism reduces the risk associated with false signals and ensures a more secure trading environment.
In line with this approach, a CALL contract should be procured when EMA 5 crosses EMA 15 from the bottom up, followed by EMA 10 crossing EMA 15 in the same upward direction. The trade is executed at the opening of the next candle after the EMA 10 crossover. The 5-period moving average serves as a preliminary signal, alerting the trader to prepare for the contract purchase.
Conversely, a PUT contract should be initiated when the EMA 5 crosses EMA 15 from the top down, followed by EMA 10 crossing EMA 15 in the same downward direction. The trade should be executed at the opening of the next candle following the EMA 10 crossover. The 5-period moving average serves as an early warning signal, indicating the need to prepare for the contract purchase.
The expiration period is equal to the time of formation of two candles after opening a transaction.
In conclusion, the Three Lines strategy is an elegant yet effective approach to binary options trading that thrives on the intersection of three distinct exponential moving averages (EMAs). One of the strengths of this strategy lies in its versatility, as it can be applied to various asset classes, including currencies, stocks, commodities, and cryptocurrencies, providing traders with a broad spectrum of trading opportunities. The utilization of Japanese candlestick charts further enhances the precision of this method, as these candlesticks offer a nuanced view of price movements over a selected timeframe, enabling traders to make informed decisions about contract entry and exit.
In an era of information overload and complexity, this strategy stands out for its simplicity and robustness, providing traders with a reliable method to navigate the dynamic world of binary options trading.
Caution! This article is not intended to be investment advice. No strategy can guarantee 100% correct trading results. A successful trading result in the past is not a guarantee that it will be repeated in the future. Any information contained in this article is for informational purposes only.
