Today we will not offer you a trading method that is guaranteed to bring you profit. No strategy can guarantee profits in binary, or any other method of trading. We hope you have already learned this. We will tell you about the takeover strategy on binary options. What it is, what kind of returns a trader can count on, what peculiarities one should know. About all this right now.
What is an engulfing in trading?
Today’s strategy is easy to understand. If you use the classic version of the strategy, you can do without complex indicators. All you need to do is to be diligent before the chart, because the signals may appear rarely.
The engulfing model is a simple pattern, which consists of only two candlesticks. The first candle should be completely within the second one. Thus, the last bar seems to absorb the first one.
The absorption pattern is a reversal model. If you have noticed this pattern on the chart, you should probably wait for the price reversal. The example in the screenshot below.
As you can see, the red candle was completely absorbed by the next bar. After that, the asset price began to rise.
Main terms of entering into the transaction
Let’s look at the basic rules of an acquisition strategy in binary trading:
Any asset is suitable for investment. You can trade currencies, stocks, indices etc. This is good because you can track multiple charts at the same time. You want to make more profitable trades, don’t you?
For short-term transactions, the takeover model is not suitable. If you are looking for a strategy for turbo options, you can close this article and read our other publications. A strategy deal is made for at least 3-6 hours, and the timeframe is set from H1.
Yes, you can set a smaller TF and trade with a smaller exposure, but then you will get more false signals. Decide whether speed or profit is more important for you.
Let’s see what it looks like in practice.
We marked 7 signals that appeared on the chart. The red marks the false signals. The green ones are profitable. The result is decent, 5 deals have closed on the plus side. If we had invested $100 in each option, we would have earned $200 net (considering 2 false signals and an option yield of 80%).
But it doesn’t always happen this way. False signals can appear much more often. To prevent this, you can filter the signals by the takeover strategy in options trading. We will tell you how to do it now.
To get more accurate signals, trade by trend. Let’s say, we see that the bullish trend in the market at the moment, i.e. the quotes are steadily growing. It means that we will make a deal only after a bullish engulfing appears. But these deals should be closed on a rollback, so as not to rest on the support level.
We also do it during the downtrend. We wait for the rollback when the quotes come to the support level, and then we wait for the formation of our pattern, after which we make a deal. You can see an example in the screenshot below.
With the numbers we marked the entry points. And another example, now with an upward trend.
As you can see, in this case the signals of the proposed strategy appear less frequently. But their effectiveness is significantly increased.
This way of trading is quite popular. It is described on several major portals. But in fact, it’s a completely failed method. If you want to earn money, choose the classic option of using the takeover pattern, without complex rules, but with a decent return.