5 Minute Binary Options Strategy
- How 5-Minute Binary Options Work
- Example Trade
- 5-Minute Binary Options Trading Strategies
- Charts, Indicators & Signals
- Bollinger Bands
- Getting Started
- Final Word on 5-Minute Binary Options Trading
- What Are 5-Minute Binary Options?
- Where Can I Learn More About 5-Minute Binary Options?
- What Are the Different Types Of 5-Minute Binary Options Contracts?
- What Are The Best Indicators For 5-Minute Binary Options?
- Are 5-Minute Binary Options Legal?
- Strategies For Five Minute Option Expiry
5-minute binary options trading strategies are popular with retail investors. The timeframe can offer significant volatility while running for long enough to sustain a substantial trend. In this guide, we explain how 5-minute binaries work, alongside helpful indicators and signals. We also rank the best brokers for trading 5-minute binary options in 2023.
How 5-Minute Binary Options Work
As the name suggests, 5-minute binary options contracts expire 5 minutes after a position is opened. Importantly, at the point of expiry, the price of the underlying asset must finish on the correct side of the strike price for the investor to turn a profit. Binaries also automatically exercise at expiry, meaning the respective gain or loss is immediately reflected in the trader’s account.
At the top brokers, 5-minute binary options contracts are available on most popular markets, including forex, stocks, precious metals, energies, and cryptocurrencies. Leading platforms also offer 5-minute binaries on various contract types, from high/low to one-touch, boundary and ladder options.
The best way to explain how a 5-minute binary options contract works is through an example…
Let’s assume that following speculation that Elon Musk is going to buy Twitter, you believe the value of the social media giant’s shares is going to rise. In fact, you think that when the market opens, the price of TWTR will exceed $50 in 5 minutes. You stake $100 on this prediction with a payout of 75%.
After 5 minutes, the value of TWTR shares is $50.20. As a result, your trade finishes in the money and your account is credited with $75 ($100 * 75% = $75).
Note, if the price of TWTR shares was less than $50 at the point of expiry, you would have lost your initial investment ($100).
5-Minute Binary Options Trading Strategies
Trading 5-minute binary options successfully means reacting quickly to movements in the market. To avoid wild guesses and unstructured speculation, it is worth adopting a clear strategy. We have listed some of the most popular approaches below.
Momentum essentially measures the strength of a particular trend. It considers the number of traders and the amount of money being invested in an asset. Importantly, once a trend gathers momentum, it is likely to continue moving in that direction for a period.
Traders can use this when taking out 5-minute binary options contracts, either in the belief that the trend will continue, or to judge when the price will begin to swing in the other direction. The MACD indicator (explored in more detail below) is useful when employing momentum trading strategies.
Pivot points can help show when the direction the price is trending may change. Put simply, if you’re watching the price of an asset such as gold increase, there will be a point when its value will start to decline again. Here, you would look at the asset’s upper and lower value boundaries from the previous day, for example.
Now this is arguably a risky strategy for 5-minute binary options since you are assuming the same price range on a day-to-day basis, however, it can be used to inform future price predictions.
Let’s say that the price of gold is increasing within the defined boundaries. You could enter a position that assumes this trend will continue. However, as the price approaches a boundary, you could enter a position that states the price will start to decrease instead.
Charts, Indicators & Signals
When trading 5-minute binary options contracts, there are several useful tools that can support the decision-making process. Both technical indicators overlaid onto charts and market signals can help you predict short-term price movements.
Japanese Candlesticks are the most popular way to view trading charts. Candlesticks use the color, width, and height of boxes and lines to convey market data. When trading 5-minute binary options, customize the time scale to 1-minute, 2-minutes, or 5-minutes.
The design of a candlestick is as follows:
- The width of the central box indicates the time scale
- The upper and lower edges of the central box indicate the opening and closing prices of the asset within the time scale
- The color indicates the direction of the price change. If the candlestick is green, the price has increased. If the candlestick is red, it has decreased
- The two lines above and below the central box are called wicks and indicate the asset’s highest and lowest values during the time period
Bollinger Bands can help show the volatility of an asset and inform trading decisions. The indicator appears in the form of a bubble that surrounds the chart’s price line.
A range is created whereby the upper and lower boundaries are two standard deviations away from a moving average. When the bubble is thin, the market is less volatile. Bollinger Bands can also help show when an asset is being overbought or oversold.
The Moving Average Convergence Divergence (MACD) indicator provides a way of quantifying momentum in a price trend. The MACD essentially uses historical data to create two moving average lines that signal when it could be favorable to buy or sell an asset.
These two lines are called the MACD line and the signal line. Any interception between the two lines indicates when the asset could increase or decrease in value. The further apart the two lines are, the stronger the signal.
You can start trading 5-minute binary options in a few straightforward steps:
- Open an account – Sign up with a top-rated binary options trading platform. Most of the leading brands offer 5-minute binaries. Key things to check are payouts, contract conditions, market access, and any sign-up offers or promotional deals. It’s also worth making sure the broker offers a user-friendly and intuitive desktop platform or mobile app.
- Analyze the market – Use the broker’s charting package to analyze your chosen market, for example, the FTSE 100. Technical traders can use the strategies and indicators outlined above while fundamental investors may want to use a platform’s news feed and market insights.
- Open a position – Once you have decided in which direction you believe the price will move, take out a 5-minute binary options contract with conditions that align with your prediction. The best brokers, such as Nadex, offer one-click trading directly through their trading platforms.
- Wait until expiry – When the 5-minute mark is up, you will either finish in the money and receive the specified payout, or if the market doesn’t move in your favor, you will lose your deposit. Importantly, winnings or losses should automatically be reflected in your trading account.
Final Word on 5-Minute Binary Options Trading
Trading 5-minute binary options is a high-risk/high-reward strategy. Short-term contracts make for an exciting way to speculate on stocks, forex, commodities and cryptos. There is also a range of strategies, indicators and trading signals that you can employ. To give yourself the best chances of success, make sure you sign-up with a reliable broker and never risk more than you can afford to lose.
What Are 5-Minute Binary Options?
Binary options are speculative products where traders make a prediction on the future price of an asset. With 5-minute binaries, investors predict where the price of a stock, for example, will be after 5 minutes.
Where Can I Learn More About 5-Minute Binary Options?
There are many resources online with guidance on how to win 5-minute binary options, including training courses, videos and tutorials, e-books, plus PDF guides. There are also active binary options trading communities on channels like Discord and Telegram that discuss strategies, signals, and indicators.
What Are the Different Types Of 5-Minute Binary Options Contracts?
There are several popular types of 5-minute binary options trades. The most well-known products are high/low binary options. Other examples include range binaries, touch or no-touch binaries, and ladders.
What Are The Best Indicators For 5-Minute Binary Options?
In addition to Bollinger Bands and MACD lines, you can use a Relative Strength Index, Average Ranges, or stochastic models with your strategy. Our top tip is to trial different chart set-ups and indicators on a demo account before risking cash on a scalping strategy, for example. We also recommend trialing indicators and signals with a user-friendly platform like MetaTrader 4.
Are 5-Minute Binary Options Legal?
Whilst the marketing and sale of binary options products has been limited in some countries, retail investors can still trade with offshore brokers. Global firms and binary options providers, such a Nadex, still offer products to aspiring traders. The key thing is to trade 5-minute binaries with a trusted brand.
A quick look at the best types of strategies for one of binary option’s most popular expiry times: 5 minute.
Strategies For Five Minute Option Expiry
There are a lot of ways to trade the 5 minute binary options expiry. This time frame is one of the most versatile in terms of the types of strategies you can use because it is inherently volatile yet at the same time can sustain a trend long enough to be useful to us binary options traders.
You can look at the bigger picture with 5 minute candles or you can drill down to 1 minute charts to see the swings in momentum. When choosing a strategy it really comes down to what kind of trader you are, what types of analysis you prefer and in the end, the asset you are trading.
When it comes to assets there is really no one class that performs best in the 5 minute time frame although most binary traders prefer forex, commodities and indices, not necessarily in that order. These assets tend to have more day to day action because they are traded globally around the clock and will move up/down within their near term ranges with more conviction than less liquid stocks.
When using the 5 minute expiry set charts to 1, 2 or 5 minute for best effect.
Most strategies are adaptable to any time frame, the caveat is that the shorter the time frame the less reliable the signal. A candlestick signal on the daily charts is stronger than one on the hourly charts that is likewise stronger than one on the one minute charts.
- Price Action Strategies – Price action strategies are trading in it’s simplest form. Traders simply pay attention to price action, the minute to minute changes in prices, and how that action behaves in order to make trading decisions. In the old days this was done by watching the ticker tape all day, today it is much easier and more fun to use a charting package like MT4. These will work with charts set to 1,2 or 5 minutes. Patterns include triangles, head & shoulders, pennants, flags, diamonds and many more that can indicate continuation or reversal in the market.
- Scalping Strategies – Scalping strategies are very short term form of price action trading although they also incorporate other types of signals as well. Scalping, simply put, is a trade based on what you think the market is going to do in the next period, and this usually means minutes, never more than 10, 5 is perfect. These strategies do not care about trend, only on which direction the market is going now and if it will keep going that direction long enough to place a quick trade. These are best used with charts set to 5 minutes as the signals are generally good for the very next candle.
- Japanese Candlestick Strategies – Japanese Candlesticks are the premier method of viewing trading charts and give a variety of signals that are at heart price action signals but can also be used for scalping and other types of strategies. The candlesticks are nothing more than an expanded method of plotting price data on a chart but the effect is startling, almost like putting on a pair of glasses and seeing the world clearly for the first time. Candlestick signals are good with any chart setting, depending on which method of trading them you choose.
- Momentum/Swing Strategies – Momentum is an important aspect of price action and technical analysis. When prices, the market, moves it has momentum. Momentum is the amount of force behind the move, this force is the sum of the people and money moving into, or out of, an asset and can carry prices in once direction for an extended period of time. When this happens you want to trade with the momentum using an indicator like MACD or stochastic. Sometimes the markets momentum will carry it too far in one direction and when it does, prices will swing in the opposite direction in order to rebalance. I would suggest using the 1 or 2 minute charts with this type of strategy/expiry combination.
- Trend Following Strategies – When there is enough momentum, often described as the entrance of new money entering the market, a trend can be established. A trend is a periodic and systematic movement in which longer term moves in one direction more than offset nearer term corrections in another. Trends, like all aspects of technical analysis, can be both measured and predicted. This means that those nearer term corrections are entry points in trend following strategies. One of the oldest sayings in trading is “the trend is your friend, always trade with your friend” and it’s still around for a reason.
This video shows how to use multiple charts at IQ Option. This can be useful if trying to spot trends over multiple timeframes as mentioned above:
Leading Brokers with 5 Minute Expiry: