The binary options market is frequently characterized as high-risk, yet, in line with typical exchange-traded instruments, it can be exceedingly profitable. Notably, it’s the element of risk that remains within our sphere of control.
In practice, many digital contract traders opt for lower time frames because it facilitates the execution of numerous transactions within a single session, leading to higher profits. Nonetheless, it’s vital to recognize that trading contracts with minimal expiration periods entails heightened risks due to the susceptibility of price movements to market noise in such cases.
To effectively manage the risks inherent in the binary options market, it’s advisable for traders to strike a balance between trade frequency and contract duration. Longer expiration periods, while reducing the influence of market noise, may offer a more measured approach. This approach allows for a deeper analysis of market trends and fundamentals, aiding in the development of a more informed trading strategy. Finding the right balance between the number of transactions and contract duration is essential to optimizing profitability while safeguarding against excessive risk.
How to reduce the risk? Use the Envelope strategy that was meticulously crafted with the conservative, methodical trader in mind. It is based on two well-known indicators Envelope and Momentum (available on the Binomo platform).
Description and Setup for the Envelope Strategy
As you might have already deduced, trading within the “Envelope” strategy typically occurs on higher timeframes. Empirical evidence supports the use of the H1 time interval for implementing this strategy. At this interval, the price is less affected by market noise, and traders need not endure extended waiting periods to realize the fruits of their trade.
For this strategy, it is essential to select Japanese candlesticks as the chart display. This choice is pivotal because the opening and closing prices of the candlesticks will serve as crucial reference points when entering trades.
Regarding the choice of assets, virtually any asset can be used; however, it’s advisable to steer clear of those that consistently remain stagnant. Opting for more volatile instruments increases the likelihood of discovering favorable entry points.
Now, let’s delve into the configuration of the indicators. Starting with Momentum, while it is a relatively well-known but sometimes underrated tool, its sensitivity to price changes becomes an advantage in the binary options market. Thus, it is recommended to retain the default parameters for this indicator.
Using the Envelope, the well-known price channel tool, you’ll see two lines forming the price channel. For the H1 timeframe, it’s advisable to set the deviation parameter to 0.2, and the period should be set to 14.
How to trade with the Envelope strategy?
Following the rationale outlined above, the penetration of the Envelope, acting as a price channel, signals the commencement of an impulsive market movement, which aligns with our trading objective.
Consequently, when the price surpasses the upper boundary of the Envelope and Momentum exhibits a clear upward trajectory, it is an opportune moment to acquire a CALL option.
Conversely, the PUT option is done when the lower boundary of the “Envelope” is breached, and, concurrently, Momentum demonstrates a firm downward direction.
Note: It’s essential to initiate a trade exclusively when the price channel has been resolutely breached, signified by the candle closing outside of it. The contract should be purchased at the outset of a new candle.
Regarding the expiration period, a prudent choice is to set it to two hours.
This timeframe provides a balance between the potential for consistent profitability and not exposing the entire deposit to excessive risk.
The “Envelope” strategy is ideal for traders who value stability and capital preservation above the pursuit of high-risk, high-reward endeavors. It provides a structured approach to trading binary options, minimizing exposure to undue risks. By adhering to this method, traders can make consistent and reliable profits in the electronic contracts market. Additionally, this strategy’s emphasis on well-defined entry and exit points and a balanced risk-reward ratio makes it a valuable tool for traders looking to maintain a disciplined and methodical trading approach.
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.