Binary Options Trading for June 25, 2013: 1/2 ITM

On Tuesday, I started watching the markets a little later than I usually do – just past 6:30AM EST. Since my primary trading focus is on swing trading spot forex, I’m usually up around 3AM EST or sometime before, as that’s usually when the markets start heating up due to the trading activity from the European session. Also, I should note that I really enjoy trading the European session for binaries – approximately the time period between 3AM-8AM EST. The market is moving during that time and I can almost always find trade set-ups I’m willing to take. Yet it doesn’t quite have the volatility as the European/U.S. Crossover does, which is also the time period when many news announcements come out and bring extra liquidity into the market (i.e., essentially more movement).

But for the most part, I don’t necessarily believe it matters much when you trade. If my schedule limited me to taking trades only during the U.S. afternoon session or the Asian session, I wouldn’t have any issue trading then. For most, finding the opportunity to trade is contingent on other activities that take up our daily time. But if you have the chance to choose among various time periods I would recommend finding a time slot that is most amenable to your trading personality. For instance, some people might like lower volatility (e.g., Asian session), while some people like higher volatility (e.g., U.S. morning session), or some people (like me) might prefer trading when there’s a healthy dose of volatility, yet the market is usually not making huge moves (e.g., European session). If you are interested in forex scalping or trading certain types of vanilla options strategies, then a higher-volatility time period might be best such that you get bigger moves, which can help you make more money. But in binary options, the success of a trade is an all-or-nothing event of simply about being above or below a certain price at the time of the option’s expiry. So in that case, I truly don’t believe it matters when you trade so long as the general market volatility suits your individual trading personality and you’re getting suitable pay-out percentages (brokers often vary their pay-outs based on the time of day).

So I took two trades Tuesday on the EUR/USD. Observing the price data from the morning, there had been no semblance of a trend in place, so I didn’t have any bias in terms of taking trades one way or another. Just after 7AM, price had formed a nice line of support along 1.31268 (top red line) before price began going higher by about fifteen pips. On the 8:15 candle, price came down and rejected the level, so I took a call option on the following candle when it re-touched 1.31268. But price promptly fell through the level and I lost the trade by about six pips.

I immediately began targeting trade set-ups at the daily pivot level of 1.31067 (purple line) and potentially the whole number of 1.3100. Nothing materialized on the pivot for call options and price fell below it and also paid no attention to the whole number. So I began targeting the pivot level for potential put option set-ups and also the yellow support 1 line (1.30704) for call options.

Price did begin retracing back up to the pivot and after a strong move up to the pivot on the 9:10 candle (tall green bar), price could not get above it and sellers continued to push back against the buyers for a good 10-15 minutes. The sellers eventually won out on the 9:25 candle with a push that closed five pips below the pivot level. This essentially formed a “bearish engulfing pattern,” which is a common reversal signal that price-action traders use to make trades. Since I felt that price was likely to continue its downward trend, I took a put option at the pivot level on the 9:30 candle when price re-touched 1.31067. The trade closed out as a six-pip winner.

That was the end of my trading for the day, but had I continued there would have been a couple good call option set-ups at the support 1 level (1.30704) at just past 10AM and 11AM EST, when price was continually bouncing off the level.

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