RSI strategy for binary options. How to set up the RSI indicator for binary options? RSI strategies for binary options
Uncomplicated strategy for trading binary options, which will be discussed within the framework of this article, once again confirms that the simplest can be the most effective. And this one is based on only one indicator - Relative Strength Index, which is easy to set up and understand and is called the Triple Confirmation Strategy.
Rice. 1. The RSI indicator is based on the triple confirmation strategy.You can use any asset, the recommended time period is 5 minutes. You can trade at smaller intervals, but the lower they are, the more noise there is on the chart. The triple confirmation strategy is intended for short-term trading, options occur after 1-3 candles.
Setting up a chart for the triple confirmation strategy.
For the convenience of working with the triple confirmation strategy, you can use it, which can be opened in a browser on our website. Or you can set up a strategy in the MetaTrader 4 terminal on your computer - all settings will be identical. We will provide all the examples with the settings of this simple strategy on screenshots of a live Forex chart. You can read more about it in the corresponding material.
So, on the chart of the selected currency pair we install three RSI indicators with settings 5, 14, 21, the remaining parameters, mainly the selected levels 30 and 70 (in the Style tab), do not change:
Rice. 2. Setting up the RSI indicator using the triple confirmation strategy. A tool with these values does not have the disadvantages of a conventional oscillator, since indicators with three different periods act as filters, where to open a trade you need to wait for all three to reach the desired value. This condition allows you to avoid the use of false signals accompanied by losing trades, which is especially typical when trading on small time frames.
Trading rules using the triple confirmation strategy.
The optimal trading option using the triple confirmation strategy is to buy an option with a time of 1 candle. It is possible to purchase two options simultaneously when receiving strategy signals, and their expiration will be 5 and 15 minutes.
You should consider buying a binary option to increase CALL when all three RSI indicators are in the oversold zone, that is, below level 30, zone 30-0:
Rice. 3. Compliance with the conditions of the triple confirmation strategy for buying a Call option. You should buy a downside option PUT when all three indicators are in the overbought zone, that is, above the level of 70, zone 70-100:
Rice. 4. Compliance with the conditions of the triple confirmation strategy for buying a Put option. First of all, we analyze the RSI indicator (5). As soon as it enters the signal zone, we turn our attention to RSI (14). After waiting for it to enter the same zone, we monitor the behavior of RSI (21). When the values of all three indicators are in the oversold or overbought zone, we place a bet on buying a Call and Put option, respectively.
A small addition to the triple confirmation strategy. You can increase filtering profitable signals, if the levels 30 and 70 of the RSI indicator are changed to “higher”. For example, you can set the levels to 25 and 75 - the number of signals supplied by the indicator will increase, but at the same time the total number of signals will decrease. The parameters of the limit levels of the RSI indicator for each trading instrument should be selected individually.
Triple filtering in this strategy shows effective results. However, it is worth noting that the number of signals when using it on a time period of 5 minutes is small, which may be considered a disadvantage by some market participants. But when using several trading instruments, the total profit from the triple confirmation strategy per working day can reach significant amounts!
In this article we will show a simple but effective strategy for binary options, based only on the indicator Relative Strength Index (RSI) , included in the standard set of the MetaTrader trading platform.
Anticipating criticism of simplicity, we note that excessive complexity and overload with indicators almost always do not benefit option strategies. Unlike Forex, where this may be justified, for example, to determine support/resistance levels or parameters of a possible correction, binary options strategies are primarily aimed at identifying trend reversals to open up or down options and there is no need for excessive complexity here.
Strategy "Triple RSI" proves it right simple strategies and allows you to make money even on short-term options, which are complex trading instruments that require high accuracy of the opening/closing moment.
Indicator settings
The strategy uses three RSI indicators with periods of 5,14 and 21. We leave the remaining parameters at default. Thus we get the combination technical indicators, which is devoid of the usual drawback of all oscillators - large quantity false signals on small timeframes. In our case, RSI with a longer period acts as a filter for RSI signals with a shorter period. And the simultaneous presence of three indicators in the oversold or overbought area will be a strong signal to open an option.
Trading signals strategy
Strategy "Triple RSI" can be used on any currency pair and theoretically on any timeframe. But the results of testing on historical data show that the recommended smallest time frame will be M5, the largest M30 and H1. On even larger timeframes, signals are very rare.
The optimal time for completion (expiration) of a binary option will be one timeframe candle, i.e. if a five-minute one is used, then we also set the expiration time to five minutes. There may be a situation when an analysis of the history of a currency pair and the selected timeframe shows that for reliability, the expiration time needs to be increased to 2-3 candles.
There is also a modification of the strategy that involves the simultaneous purchase of two identical binary options, but with different expiration times. The first one is for one timeframe candle, the second one is for 3 candles. But everything depends only on the results of historical testing.
The strategy signals are quite simple:
- down option ( PUT) open when all three RSI indicators are in the overbought area;
- down option ( CALL) open when all RSI are in the oversold area.
We leave the levels standard: overbought – values in the area of 70-100, oversold – area of 0-30.
In practice, the strategy work looks like this. We observe on RSI(5) and as soon as it enters the signal area we wait for the corresponding entry from RSI(14) and RSI(21). When all indicators are in the same area, open an option. The figures show examples of signals:
Call option (CALL)
Put option (PUT)
The Triple RSI strategy is quite profitable and easy to learn for beginners. There is an opinion that the strategy is not good enough because... gives few signals due to their triple filtering. But this is rather an advantage of the strategy, because the cost of an error in binary options is much higher than in the Forex market.
From the article you will learn:
Hello, dear readers and visitors of our site. The topic of our article will be binary options strategy triple confirmation rsi. As practice shows, the simplest and most logical things work in the market, and so the 3 RSI binary options strategy is just such a system.
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What newbies struggle with
I think this system is perfect for any novice trader who is looking for a simple, and most importantly, logical approach. The essence of this system is that it is based on only one indicator - . However, I want to note that although there is a rational grain in this system, you should not naively believe that it will save you from all problems.
Not at all, I’m telling you for the umpteenth time that there are no grail strategies that would always be profitable in everything. I understand that you would really like this, but, alas. In general, I have already said more than once that the simplest and most logical things work in the market. Beginner traders tend to complicate things to a great extent. That is, they attach a whole flock of indicators to the chart and believe that now they can get fabulously rich. So I just imagine a person’s face when, precisely because of all this incredible number of indicators, the person simply becomes stupid. Because, I constantly say, don’t attach so many obscene indicators to the chart, you will only make it worse for yourself.
Watch an overview video about the strategy
Basically, I understand why people tend to overcomplicate their approaches. Most likely this is due to the fact that they are trying in every possible way to get rid of losses. For me, this is not entirely clear, people are quite understanding about their everyday expenses, but despite all this, they are simply panicky afraid of making a loss in the market.
It is worth clearly understanding that losses are part of the trading process. Of course, receiving losses is unpleasant, however, this is all part of the process itself, and the sooner you accept this, the better it will be for yourself. Understand that there is no point in being afraid of something that cannot be avoided. In addition, you need to clearly understand that the trading approach is, of course, an important aspect in achieving success, but it is far from the most determining one.
You may have a very high-quality trading approach, but if you are an emotionally unstable person, then you will not be able to realize the potential of even the coolest trading system. Therefore, do not forget that the formula for success is psychology + money management + strategy. If anything from this list is missing, then know that you will not be able to succeed.
I also want to tell you that the principle that works perfectly in trading is that the less, the better. That is, it is better to open one, but very conscious and balanced transaction, than to open a bunch of transactions, it is not clear why. This is the problem of many novice traders, that they are chasing the number of transactions, which supposedly will allow them to earn significantly more profit.
In fact, any experienced trader understands perfectly well that 1 confident trade can be comparable in profit to a dozen trades. For example, you can take 100 points of profit in one transaction, or you can take it in 10 transactions, taking 10 points in each. Well, now, let's talk in more detail about what this 3 rsi binary options strategy is.
Preparing a binary options desktop for triple confirmation from RSI
As I already said, the essence of the system is that we will use one RSI indicator, but we will install it on the chart three times. You can use this approach on any currency pair, but I recommend that you limit yourself to the major currency pairs. In addition, we choose M5 as the working interval, and the expiration time will be 3-5 candles.
So, to prepare our desktop for work, we set the RSI on our chart three times, with periods of 5,14 and 21, and set levels of 70 and 30 for each. If the price enters the zone of 30 and below, this is an oversold zone, if the price reaches 70, then this is an overbought zone. In general, the essence of the approach is that when the price is in the overbought zone, then we expect a sale, but if it is in the oversold zone, then we expect a purchase.
The idea of the 3 RSI trading system
However, if you work according to this approach with the help of RSI alone, then there will be very little sense. The fact is that RSI is an oscillator, and, as you know, any oscillator behaves incorrectly during a strong trend. That is, when there is a clear and directional market movement, the indicator lines may stick in one of the zones for a long time. Unfortunately, you won’t be able to get rid of this, because this is primarily a feature of this indicator.
However, if we set the RSI three times, then this gives us the opportunity to more accurately assess the situation that is happening in the market, and, accordingly, find a much better deal. So, now we have installed the indicator on the chart three times, what do we now need to wait for. Now we need to wait for the moment when all three indicators are simultaneously in or oversold. After this happened, you and I purchase the corresponding option with an expiration of 3-5 candles, that is, taking into account the M5 working interval, we take the option for 15-25 minutes.
Example
I would like to immediately note that there will not be many deals! Within one currency pair, not a single transaction may appear per day. Let's for better understanding Let's look at an example!
I marked with a vertical line the moment when it was possible to purchase a put option. Why? Notice how all three RSI lines are clearly located in the overbought zone. And, as you can see, the price actually turned around, and we would have made a profit.
Total
Actually, this is an interesting, simple, but at the same time quite effective approach. I would immediately like to point out the fact that if there is a clear trend in the market or a hint that there is one, then it is better to refrain from opening any trading positions. This approach is far from best helper when the market is trending.
Moreover, if it is observed that the price is clearly and intensely moving in a certain direction without rollbacks, then this approach will fail. But here you must understand that nothing is perfect! But I can say that if you use this trading approach wisely, it can indeed be profitable in the long run. But don’t rush, and wait only for the highest quality deals.
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Description of the indicator
RSI belongs to a group of oscillators that are used for various indicator strategies. That is, its value always fluctuates in the range from 0 to 100. Moreover, its main task is to determine the relative strength of movement. The indicator looks the same on all platforms and all brokers (with the exception of graphical aspects). This is a line that is in constant motion from bottom to top, top to bottom, or just straight.
In addition to the range, there are 2 more direct lines horizontal lines. By default, they are at 30 and 70. The first shows the threshold of the oversold zone, the second - the overbought zone. What does it mean? If the market is oversold, it means that after some time the purchase of assets will begin and the price will go up. If the price is in the overbought zone, then we should expect a decrease in quotes.
For a better understanding, we will provide a screenshot of RSI from the IQ Option broker.
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Surely you already understand how it can bring profit. If the price goes above the 70 line, bet on a fall. If it goes below 30, buy a Put option. IN general outline everything looks exactly like this.
Important! The only disadvantage of this indicator is that it can remain in overbought or oversold zones for an indefinite period of time. Especially when there is a strong trend in the market for the selected asset. The result is an unsuccessful deal and loss of investment.
Description of the strategy
Some use RSI to determine divergence. Others supplement it with MACD or other indicators. We will not argue that these options for using the oscillator are ineffective and will lead to a “drain” of the deposit. However, we did not consider these options and suggest that you try trading with only one indicator to test its effectiveness.
Select a terminal and set up an indicator
Most binary options brokers take care of the comfort of traders and provide the ability to overlay RSI directly in the browser. For example, Olymp Trade or IQ Option, with which we will trade.
To begin, let's go to trading platform broker, select the indicators tab and click on “Relative Strength Index”.
In the window that opens, you should set the settings. Only the period needs to be changed. By default, it has a value of 14. It is with this period that the author of the indicator recommends conducting analysis.
However, RSI was created long before the advent of fast trading binary options. Charts were usually displayed on a daily time frame. We will trade turbo options for 120 seconds (if desired, you can increase the expiration period to 15 minutes or reduce it to 60 seconds). Therefore, the period will have to be reduced to 5.
We leave the overbought and oversold levels with the default indications, that is, 70 and 30. You can also change the colors and thickness of the lines so that the oscillator looks more expressive and you do not miss a suitable signal for entry.
Entry conditions
Now let's look at the moments to open a deal. Let's start by buying a down option.
The optimal place for entry is marked with a red beam. Why? Take a look at RSI.
You see that the price is in the overbought zone and at the same time the indicator line is heading down to around 70. It is at this moment that you need to make a deal. But if you look at the beginning of the screenshot, you will notice that there the line was also heading towards level 70, but did not cross it. Therefore, to be sure, we recommend waiting for the candle to close and entering a trade only on the next candle, when the line leaves the overbought zone.
Now let's look at the signal for concluding a bullish trade.
The RSI line is in the oversold zone, but is directed to the center. We enter trading as soon as the price reaches 30.
No less an important condition to enter is to comply with the timeframe and expiration dates. The options expiration time should be 4–8 candles. That is, when trading a turbo option for up to 2 minutes, the candle time should be 15–30 seconds. If the expiration time is 5 minutes, you should choose a minute timeframe.
Let's make a deal
Let's move on to the bidding.
In the screenshot you see that before the opening of trading the price was in the oversold zone. Therefore, we waited until the RSI line touched 30% and opened a bullish trade with an expiration time of 2 minutes. The result is also shown in the screenshot.
Video tutorial on RSI strategy
If you want to watch the effectiveness and operating principle of the indicator on video, we suggest you watch this lesson from Olymp Trade.
Everything is simple and profitable. However, first, trade for some time on a demo account and learn to identify the most accurate signals.
Today, the RSI indicator, which is one of the key oscillators used by traders around the world, is increasingly used for trading binary options. This indicator shows the trader on the chart a certain “momentum”, namely the amplitude and speed of change of price movement.
Today we will tell you how to trade with the RSI indicator on binary options and look at several strategies.
RSI indicator for binary options trading. What is he capable of?
As is known, any profitable strategy both for trading Forex currencies and binary options, is based on the formation. At the same time, the market is so heterogeneous, and the number of signals it produces is so large that processing all the information received from it without the use of automatic algorithms is incomprehensibly difficult.
Also, carrying out all kinds of independent calculations is not a rational matter. While you spend time conducting a thorough analysis and making a forecast, the market will move ahead and the results obtained will no longer be relevant, that is, it is not advisable to use them when trading. Therefore, to trade options, traders often use a profitable strategy with.
The RSI indicator is able to determine in real time market extremes (oversold / overbought), where the probability of price reversals is very high, and also calculate the direction of trend movement.
To put it simply, the strategy for options with the RSI indicator allows traders to analyze the stability or weakness of price conditions in the market.
This indicator is based on the use of prices that closed in a certain time interval, which gives rise to its high efficiency, time-tested.
As a result, a profitable strategy with the RSI indicator is applicable almost everywhere - for trading binary options, Forex and other markets and exchanges. In other words, RSI for binary traders is just what the doctor ordered. An extremely popular, reliable and at the same time very simple indicator - what more do you need?
On the scale, the indicator is displayed in the range of values 0-100. The closer this value is to zero, the weaker the downward price movement, and the closer to 100, the less active the upward price movement becomes. By default, the indicator takes into account prices for the previous 2 weeks (14 days), but this value can be changed in the settings if desired.
According to the creators of this algorithm, when price movement very fast and the indicator line rises rapidly, this indicates that the market is entering the overbought zone.
This means that the price will “fizzle out” in the very near future and begin to fall. In the opposite situation, when the RSI line flies down, the market enters the oversold zone. When the indicator value is more than 70, it is overbought, when less than 30, it is oversold.
If the indicator line moves in the corridor between values of 30 and 70 (about 50), then there is no trend in the market and a neutral situation is observed.
All this is used by traders for options trading.
Strategies for binary options with the RSI indicator
Let's start with a classic example of a binary options strategy with RSI. So, if the indicator line rises above the 70% level, this signals to us that the market has plunged into the overbought zone and we can buy.
When the indicator moves downward and its line reaches the 30% level, the market goes into the oversold zone, which means we have the opportunity to purchase a Put Option.
This is the simplest, yet most profitable strategy with the RSI indicator.
A profitable strategy based on the RSI indicator using divergence on options
In this strategy with the RSI indicator, traders use the following concept: the discrepancy between price indicators and indicator indicators. In the picture below you see how the price is making peaks, but the indicator does not confirm this trend. There is a divergence here that quite clearly portends a market reversal.
A strategy for binary options with the RSI divergence indicator is an excellent solution for short-term trading. Sometimes situations arise in which reverse divergence occurs. At such moments, the price on the chart has already begun to reverse, and the indicator continues to build a strong trend line with the next peak or trough.
If a similar picture is observed, this means that a strong trend is expected.
The fact that the current trend continues can be evidenced by an indicator line with a clear direction (up/down), located between the 30% and 70% zones.
How to use such RSI indicator signals on binary options, see here:
Triple RSI strategy using the indicator. Description and trading of binary options
There is also a strategy for options traders called “Triple RSI”, since it involves three RSIs with different periods. This strategy is another confirmation that the simplicity of the trading system is the key to high profits, even in short term trading, where options are a complex instrument that certainly requires maximum accuracy in the moments of opening and closing positions.
So, as we have already said, this profitable strategy involves the use of 3 indicators at once:
- RSI (at value 5),
- RSI (value 14)
- and RSI (value 21).
We do not touch other parameters - we will leave them at default. This way we will get a combination of technical algorithms that is devoid of the usual disadvantages inherent in all oscillators - false signals at short time intervals. Here, an indicator with a larger period will act as a filter for signals from an indicator with a shorter period.
And the presence of all three RSI in one area () is a strong enough signal to open an order.
The Triple RSI strategy can be used equally well for any trading instrument and any time interval.
But as practice has shown the best options timeframes are: the minimum is M1, and the maximum is M30 and H1. If you use large time intervals, then signals will arrive very rarely.
The optimal expiration time (completion of the option) for this strategy will be 1 candle on the time frame, that is, when using M5, we select the expiration time 5 minutes. There are situations when the historical analysis of a pair of currencies on a selected time interval indicates that, for greater reliability, the expiration time should be increased to 2 or even 3 candles.
There is also a modification of this system that provides for the simultaneous purchase of two identical options, but with different expiration dates. Let's say one option is for 1 candle on a time frame, and the next one is for 2 or 3 candles. Everything here will depend on the results of history testing.
Signals of the Triple RSI strategy
Signals for opening orders according to the options strategy with the RSI indicator are quite simple and understandable.
- We open the PUT option when the lines of all three indicators enter the overbought area of the market.
- The CALL option opens if all RSI lines are located in the oversold zone.
Examples in the pictures below. We leave the oversold and overbought levels as standard, that is, oversold in the range from 0 to 30, and overbought in the range from 70 to 100.
In practice, trading using this strategy looks like this: you watch the RSI (5) and after it enters the signal area, wait for two other indicators to enter the same area. When all three RSI are in the same zone, open an option.
This, I would say, is a fairly profitable strategy, accessible even to beginners, however, there is an opinion that due to triple filtering it is not good enough, since it produces fewer signals than we would like.
We believe that this is, on the contrary, an advantage of the strategy, since more accurate and clear ones are much more important than in other markets, because the cost of an error is much higher here. That’s why this strategy uses triple filtering.
A profitable strategy with the popular RSI indicator