Trading Options Using Fibonacci Retracements

Trading using Fibonacci retracements is one of the most simple yet very effective tools you can add on top of almost any binary and standard options strategy. Without going into the math details behind why it works, Fibonacci lines are support and resistance values where price is likely to reverse. The most common retracement values are 23.6%, 38.2%, 50%, and 61.8% towards the previous minimum or maximum. Most charting platforms will draw the retracement lines once you label the the local minimum and maximum. Let me show you some examples from the AUD/USD

Daily price chart for AUD/USD from September to December. Click to enlarge.

Notice how price starts to go back up but then reverses when it hits the 61.8% retracement line and resumes the previous downtrend. Here's another example.

Monthly candlestick chart for AUD/USD. Click to enlarge.

This time price is in an uptrend and starts to go down and then reverses when it hits the 38.2% retracement and then continues the uptrend.

A few important notes when using Fibonacci lines to make money at binary and standard options.

1) Only use Fib. lines when the market is trending. They won't work when the market is ranging as the market would likely retrace all the way back to where price originally was.

2) Fib. lines work better on higher time frames. Price has a much higher change of reversing when it hits a Fig. line based off a 4 hour, daily, weekly, or monthly chart than a 5 min. chart.

3) The Fig. lines should be treated the same as support/resistance lines in terms of when to enter a trade. In other words, wait for conformation in candlestick patterns/price action before entering a trade. Fibonacci lines are another tool that can tell you that price might be reversing. As you can see above, Fig. lines by themselves are by no means a guarantee of reversal. More about candlestick patterns  Here.

2/19/15 Technical Analysis

A Hour Trading Binary Options

I didn't have too much time to trade today but did manage to find one good one on the Nzd/Usd. Saw a nice engulfing candle and decided to take the trade. Picked up some solid pips! Ignore all the lines, that's for a different strategy that I'll be discussing later.

Arrow is where I entered, the check mark is where I took profit

My New Binary Options Strategy

As of about 6 months ago, I started trading real options instead of binary options. I do use a very similar price action strategy with a few minor differences. For starters I make trades from higher time frame charts, 15min to daily charts, and hold on to the trades for a longer time. There is much less 'background noise' and it is easier to have more confidence in your trade this way. I also do more trading based on price breaking out of it's range instead of staying in its range. Let me show you an example below.

Arrow is where I placed a put, top red line is stop loss, green line is take profit, and moving red line is 150 moving average. Make money at binary options

 For this trade on the 4 hour chart, I noticed the 150 moving average was very negative sloped dispite price making higher highs from October 3rd to October 15. Since long term the Eur/Usd was still in a down trend, I was waiting for a point to enter short. From the 15th to 20th, price was in a tight range, not moving one direction clearly. So I waited until price made a move and broke the support line. On the 21st, that happened so I entered short, with a take profit at the previous support line. It ended up hitting my take profit within the next couple of days for a solid victory!

Almost forgot to add, using high time frame move averages can give you a quick glance at were price has been heading. More info to come.

Make money at binary options!