Binary Options Trading for June 19, 2013: 4/5 ITM

I started watching the markets shortly after 2AM EST. Before I started trading, I saw that I had three main levels to work with – a support level at 1.33874, the whole number of 1.34, and a 50% Fibonacci retracement that I have drawn in on the daily chart. The Fibonacci level is relative to the price move from 1.1876 to 1.49394 that can be seen if you scroll out to about three years of price data on the daily or weekly chart. Being it’s the 50% level, the line denotes the midpoint of the move, which falls at 1.34077. As I’ve mentioned in previous posts, I like drawing Fibonacci retracements on the largest timeframes (i.e., daily, weekly), as many traders plot these to determine potential buy and sell zones simply because so many other people do the same, as well. Many banks and other large financial institutions pay attention to the higher timeframes and use Fibonacci retracements as a tool to find buy and sell orders. So I tend to find that these areas tend to lend themselves to some great forex and binary trades.

That said, I never did end up taking a trade at the 50% retracement today. Price did make a big move up on the 2:45 candle up to the 1.34077 level and went through it by a couple pips, but it failed and fell back through. I actually had a forex limit order set at the 50% retracement for an opportunity to go short the EUR/USD. I also had some previous price congestion from back in February going for me on that particular trade. The trade went into effect on Tuesday, June 18 when price initially touched that level. It turned out to be a fantastic trade and it hit my initial take-profit level of 1.31801 for a net gain of 226 pips (when including spread).

But that was the only action the 50% retracement saw during my particular binary trading window on Wednesday so I never had the opportunity to trade it. I did not trade the only touch of it on the 2:45 candle given momentum was so strongly up, to boot, and also because of the fact that I did not see a subsequent re-touch of 1.34077 after the initial rejection.

The whole number of 1.3400 never came into effect during today’s trading. It blew right through it on the 2:30 candle and never really showed any sensitivity to it for the remainder of my trading session so I simply ignored it. Sometimes whole numbers do come into play as a potential support or resistance level but sometimes the market simply pays no attention to them, especially if one has recently and frequently come into play. Whatever you do, always be careful to never trade the whole number alone. Always look for some other additional factor(s) to support your trade if you do take a call or put option along a whole number.

Once price retraced back down from the 50% Fib, I began targeting 1.33874 as call option territory, given that price had congested neatly along that line of support between 1:30-1:50 earlier in the day before I began trading. It did touch 1.33874 at 3:25, but momentum and the general trend for the morning was down and a re-touch did not occur on the following candle after the rejection. So I continued to wait.

Shortly thereafter, price formed a decent level of resistance along 1.33941 before heading back down to 1.33874. Price did form a nice wick above 1.33941 on the 3:40 candle. Usually, if a false breakout occurs along an area of support or resistance it’s a signal that price could move back above that level in the future. Therefore, you should be cautious about trading support and resistance that has been breached by false breaks. Often you will find that price breaks above the level in subsequent re-tests.

But I did find my first trade of the day on the 4:05 candle (first red arrow in the image below). Price came back up to 1.33941 and rejected the level on the 4:00 candle, which set up my put option on the re-touch on the 4:05 bar. My trade expired at the end of the next candle. It was in my favor most of the way, but it eventually went against me for a bit before settling back down as a break-even (at-the-money) trade. I don’t mind break-even trades at all. Everyone loves getting their money back and it’s definitely better than losing.

I felt even better about the break-even trade on the next candle, as price went about ten pips against my put option entry at 1.33941. I did begin targeting that same level, though, for call options once price began coming back down. Nevertheless, price broke through it without rejecting 1.33941 so I excluded it from consideration going forward unless new price data would suggest otherwise.

I began eyeing 1.33874 once again as a support level for potential call options. This level was very robust, as it had seen three price rejections already that morning. Price strongly rejected 1.33874 again on the 5:10 candle so I took a call option on the 5:15 candle. I rode that trade out for my first winner of the day of five pips.

My third trade occurred shortly afterwards on the 5:35 candle. I identified a new price level – 1.33935 – as a potential area of resistance. Price had shown resistance to that level just before 5AM, and was showing resistance again a half-hour later, with back-to-back wicks rejecting 1.33935. So combined with an overall recent downtrend (for the past few hours) I decided to take the touch of the level on the 5:35 candle and it closed out as a three-pip winner.

Another trade materialized about twenty minutes later on the 6:00 candle. Once price retraced back down from 1.33935 I immediately began identifying 1.33874 as call option territory once again. It had already held over and over again. Price did break below 1.33874 by a few pips – as it had done earlier – but it wicked back above that level so I decided to take a call option on the touch of 1.33874 on the following candle. Price continued to hold, just barely, for about a one-pip winner.

I began looking back at 1.33935 as an area for put options, but price came back up and closed above the level on the 6:25 candle so I did not take the trade. Price did begin retracing back down to 1.33874 once again. It rejected that level on the 6:55 candle, so I took a call option on the re-touch of the 7:00 candle and that produced my final winner of the day for about three pips.

For the entire day, I had five trades; four were ITM and one sat at break-even. I’m happy to say that once I resumed binary options trading this month, my win percentage has been over 80%. I think a lot of that has to do with being more conservative with my trades than I was before and always getting in a trade only when I get the exact price that I want. In the past, I simply took trades on the touch of levels and that was giving me about a 70%-75% win rate, on average. But once I’ve started narrowing my trades down even further and waiting for a rejection and re-touch as confirmation of a good set-up (a new “rule” I guess you could say), it has increased my accuracy on these trades that much more.

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