60 second Trading Strategy - Using the Engulfing Pattern
by Girvan Lambert
When trading binary options, one is best off steering clear of 60 second options. Sure, trading such options is one potential path to near-instant gratification, but it is also the path which runs closest to a crapshoot. Indeed, when the expiry times are measured in seconds and when launching a trade becomes an issue of hitting the button fast-enough, there are few strategies that have any chances to succeed in the long-run. With that in mind, my personal recommendation would be to just move on to options with much more generous expiry-times, where you have time to plot a proper course for your strategy and to actually let it work its magic, but if you really have your mind set on the 60 seconds deal, here's an approach which is better than just flipping a coin.
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With 60 second expiry times, all one really has to fall back on are candlestick patterns. Fortunately, there are a number of such patterns which foretell trend reversals, and of these patterns, today we'll take a look at the engulfing pattern. Picture the following scenario: you have an uptrend with bullish candlesticks of various shapes and lengths following each-other: suddenly, a massive bearish candlestick appears, completely covering/absorbing the body of the previous candlestick. The way this bearish monstrosity gobbles up its bullish predecessor is clear indication that the sellers are exerting significant pressure and that a trend-reversal is in the process of forming. In this case, the called-for course of action is obviously a Put trade. Now then, under other circumstances, as soon as the pattern surfaces, one will wait for a confirming signal before launching the trade. In the case of short expiry times though, this pattern may yield some errant signals.
The same trend reversal can occur the other way too obviously, signaling the turning of a bearish trend into a bullish one. In this case, a Call option should be purchased.
Here's what one should remember in regards to this strategy: a clear bullish or bearish trend has to be present before the formation of the pattern. The pattern should be made up of two candlesticks, of which the second one engulfs the first one. The colors of the two candlesticks have to be contrasting. The fact that the body of the second candle is bigger than that of the first one suggests that the previous trend has run out of steam and that the new one is garnering momentum. Thus, the bigger this size-difference is, the stronger the signal.
This strategy is easy to use and it should give you an anchor for your 60 second trading. Again: I'd personally stay away from such short expiries, but if you're delving into it, you may as well try to do it the right way. Flipping the coin is never a "strategy" or even a decent idea in binary option trading.