Five Binary Trades on the EUR/USD on June 4, 2013

I took five binary trades today with good results, winning four of the five. I had actually been watching the market for over two hours before I took my first trade but nothing had really set up to my liking by that point. I did have a 38.2% Fibonacci retracement level in play today, but there wasn’t really anything supporting a Fib trade before 6AM EST. If I’m going to trade a Fibonacci level, I at least want there to be some additional factor supporting the trade, like a pivot point, or better yet, a notable support or resistance level created by previous price history.

I took my first trade of the day on the 6:35 candle. I was looking at 1.30853 as a potential area of resistance on the pair (top red line that I have drawn in on the image above). Price had reversed at that level most noticeably at 4:35AM EST, which was the current high-of-day (HOD) for the EUR/USD at that point. You can also notice that the wick of the red 3:15 candle had come up to touch 1.30853, as well. It wasn’t a perfect set-up, but HOD/LOD (high-of-day/low-of-day) levels can be valid support and resistance points to look out for. Price touched 1.30853 on the 6:35 candle. I took the trade just before the five-minute trade lock-out as price was wicking back down below 1.30853. Normally, in a case like this, I might have waited for the candle to close below the targeted level before taking the trade on the touch of 1.30853 on the next candle. But I was simply looking to take a very short-term bounce off 1.30853. I would have much more confidence of the level continuing to hold for just five minutes than I would for another 15-20 minutes if I had gotten in for the next expiry. Trend was up for the morning overall, so I had to also be weary that I going a bit against the grain of the market.

Luckily for me, getting in for just a short 5-6 minute trade was the right decision, as price closed in my favor for about a three-pip winner. Yet on the next candle, price continued to follow the upward trend for the morning and went back above the level at which I had taken my put option.

My next trade was on the 7:30 candle and was again on the touch of 1.30853. This time, of course, it was a call option. Price had come back down to 1.30853 on the 7:25 candle and rejected the level, which to me was a valid signal that I should take a call option on the touch of the level on the 7:30 candle. This produced a three-and-a-half pip winner.

Before I go on to my next trade, if you’ve looked at the chart to some extent, you might be wondering why I didn’t take a call option on the 7:00 candle, which was another touch of 1.30853. The reason was that I simply didn’t have a clear idea of what the market was going to do. Therefore, I was uncomfortable with taking the trade. Based on the price action I was observing, there was a bit of a thrust through the previous resistance point of 1.30853, but downward momentum on the 6:55 candle was fairly strong – about ten pips at one point. Even though that price bar rejected 1.30853 (normally a signal that I take as a possible trade set-up on the retouch of the level on the next candle), I was uncertain whether the level wanted to hold as support or bust back through it. In hindsight, it would have been a good trade and given me almost a ten-pip winner, but I simply didn’t want to put my money on a call option based on the type of action I was observing.

You might also be wondering why I hadn’t considered a call option upon another touch, rejection, and retouch of the level on the 8:20 candle. The one thing I was leery about with regard to that set-up was the break and close below 1.30853 on the 7:55 candle (long red bar). Even though price eventually climbed back above that level and stayed above for another half-hour, that was an indication to me that a price reversal might be in store shortly thereafter. Granted, the 8:20 potential call option set-up would have been another trade that would have worked, but my impression that the EUR/USD would head back down was confirmed on the 8:30 candle with a huge price movement. Those who read my blog with some regularity will probably perceive that I tend to be pretty conservative and patient with trade set-ups. That’s definitely the case and I’m fairly certain that I probably would have yet to make a dime trading if I didn’t have that temperament toward my trades.

My next trade was on the 8:40 candle. Momentum and trend from the past hour had been downward, but I had a couple things working for me on this call option set-up. I had, of course, the 38.2% Fibonacci retracement line in play, which I had drawn in on the daily time compression. I also had some previous price support from earlier in the day working in my favor, particularly on the 6:15 and 5:30 candles, and some minor support seen even earlier at that level on the 4:15 and 3:20 candles. So I took a call option on the touch of the 1.30727 price level (where the 38.2 Fib was located). In hindsight, it looks like a pretty ugly trade. It went against me for practically the entire trade, going eight pips out of favor before settling as about a three-pip loss. It was a pretty good set-up, but I can understand why I lost the trade. More liquidity was entering the market at this point and although there were definitely some buyers in play at 1.30727, following the same type of logic I did, but the sellers simply kept on outweighing the buyers at this point in the market and drove price below my level.

But things happen and all one can do is look for future points in the market that might offer quality set-ups. For me, I could have considered a call option at 1.30666 where there had been price support at 5AM EST and resistance at 2AM. But I didn’t want to fight against the trend once again, although it’s a trade that would have won. So I decided that my next area for call option set-ups would be all the way down at 1.30455 where the pivot point was located. There was also a 61.8% Fibonacci retracement in play at that area, giving me an area of confluence on which to base my trade.

My next trade, however, was a put option back up at 1.30727. Momentum had been up a bit just before my entry on the 9:40 candle. However, price was clearly experiencing some resistance at that level so after the rejection observed on the 9:35 bar I took a put option on the touch of 1.30727 on the 9:40 candle. I had three factors working for me on this trade:

1. support (and now potential resistance) from previous price history

2. the 38.2% Fibonacci retracement and

3. an overall downward trend

It went against me for a bit before wicking nicely and closing out for a solid eight-pip winner.

My final trade of the morning came on the 1.30455 price level that I had mentioned earlier regarding the pivot level. Of course, I didn’t trade it on the first touch. Momentum was significantly to the south-side on the first touch. But I got a strong bounce off the pivot on the next candle (10:20 bar) so I was able to get in the trade on the subsequent touch of 1.30455 on the 10:25 candle. The first 5-7 minutes of the trade weren’t spectacular and it was against me most of that time, but price was holding reasonably well and it eventually wicked back above and gave me my best winner of the day (12 pips) by expiration.

I called it quits at that point after a solid 4/5 ITM day.

As always, please leave any questions, comments, and/or feedback in the comments section below. I definitely welcome any and all inquiries.