Price Patterns – How to Pick the Best Possible Expiry
Okane is a blogger and Binary Options trader since 2013.
"I am mostly active on YouTube where I share tips and tricks on Binary Options trading."
One of the biggest challenges that most Binary Options traders face is choosing the right expiry. If you are a beginner and have already been researching Binary Options strategies, you may have noticed that most strategies already come equipped with their own expiry suggestions. Despite this, you may be experiencing that those suggestions don’t always work as promised. You are not alone. One reason for this lack of accuracy is that markets constantly change patterns and volatility and an expiry that worked well for a period, could suddenly stop working. Don’t give up though… I have good news! In this blog post, I will show you how you can find and analyze those “changing patterns” to identify the best possible expiry for your trades regardless of timeframe and strategy.
Candlestick Charts – Finding the Patterns
Most traders are too focused on the indicators and partially or completely neglect the vast amount of information that is flowing right in front of them. That’s right, the candlestick charts themselves provide more than just the direction of the price. Here below is an example of a EURUSD H1 (60 minute) candlestick chart.
Okay, let’s start with the box on the left. As you can see, the price had been trending up before it broke the trendline. You can clearly identify how price fell for several candles before retracing back up to it again. After that, it fell again for about 5-6 candles. So far so good? That’s our first pattern! We will use this to trade the next breakout if there is one. The right box shows that we did get another breakout. How to trade it? In this case, it’s safe to wait for the retracement (like in the first box) and then enter the trade after we get a red candlestick closing to make sure price isn’t continuing up. Your expiry should be based on the first pattern we already found, about 5 candlesticks. Too complicated? Let’s try some more patterns!
Works On Any Timeframe!
You don’t like waiting? Neither do I. You can use this method on any timeframe and any asset. Here are a few more examples but this time using the 5 minute timeframe charts of NZDUSD:
This NZDUSD chart illustrates 5 minute candlesticks. At first, the trend is going down and we can take note of how price gets rejected at the trendline (shown in the first yellow box on the far left). It’s easy, count the candles of the first and second drop and you will notice that price falls for about 4xM5 candles each time before any bullish movement takes place. We can identify two similar patterns, this is all we need.
Remember, we should always wait for at least one candle to close in our direction (in this case down = red) before we enter so we subtract that from our expiry. Therefore, the optimal expiry here is actually 15 minutes (3xM5 candles). Now we can apply this to a put option next time we are in a similar situation. Take a look at the two subsequent yellow boxes. Three similar opportunities showed up moments later which we could have traded. The yellow arrows point out the entries. It seems that 2 of those turned out to be winners and 1 a losing trade.
Works in Any Direction!
Hours later, price breaks our trendline and climbs up. It means that we now need to focus on taking calls instead of put options (see the image above). The first white box shows us new patterns for potential upcoming call options. Once again, it seems to be 4xM5 candles bouncing off of the trendline. It means that 15 minute is a good choice for expiry. In the second white box comes our first opportunity to enter a call option. The white arrow marks our entry which is right after the first candlestick closes in “our favor” - meaning up. There are more opportunities and patterns on the charts shared above, can you find them on your own now?
Not the Holy Grail but Close Enough?
Let’s be honest here, this is a pretty solid method for breaking down the charts and finding the necessary details to select the best possible expiry. On the other hand, it is not flawless and you need to know a thing or two about trendlines & breakouts. You also need to spend some time practicing and you will surely make some mistakes at first. Overall, I would not call this a ‘Holy Grail of expiry selection” but then again; there are no Holy Grails anyway! Trading is all about stacking the odds in your favor which is exactly what we try to achieve here by letting the current price patterns pick the right expiry for us instead of “making up” our own randomly picked expiries.
Ayrex Team and Okane blogger and trader.