The Moving Average Pivot Strategy
by Girvan Lambert
When it comes to trading binary options profitably, Pivots are definitely among the weapons you can field in service of you cause. How do you use these pivot points though: how do you determine and how do you trade them? One way to do it is through the Moving Average Pivot Strategy which I'm going to detail in this article. Now, the thing about this strategy-approach is that despite the fact that it's relatively straightforward, it can be a tad difficult to master and it does in fact require some experience.
This strategy is aimed at short time-frames and we'll use short-term moving averages and pivot points for the target prices. Pivots can obviously be set in a number of different ways, but for the purposes of this exercise, we'll use the Fibonacci Retracements. As far as time-frames are concerned, the strategy is broken up into two parts. The goal of the first part is to set the pivot points, while that of the second part is to actually produce the trading signal.
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The first time frame is a 5-day one, using 30-minute candles and we aim to set the pivots through it. What we do is the following: we look for the most recent peak-trough combination and we use that as a starting point for tracing the Fibonacci Retracement from left to right. This will give us the pivots we're looking for and these can indeed be used for quite a while, at least until another peak-trough combination comes about on the chart.
With the pivots set, we switch to the 1-day chart with 5 minute candles, and from here on out, it's all about looking for candle patterns and keeping an eye on the moving average, factors which will signal continuation or impending reversal. The pivot points are obviously essential here: if one of the Fibonacci Retracement levels is broken, the price usually moves past it to the next such level. If one of these levels acts as support, the price is likely to bounce back to the one above it, and if one of these levels acts as resistance, the price-action will usually return to the previous level. The moving average will act as a trigger for the trade signal, while the Fibonacci levels can be used for confirmation. Thus: if there's a bullish cross-over on the moving average and there's also a bullish cross-over on a Fibonacci level or a support taking shape at one of these levels, we have a rather strong Call signal.
Again: because the Fibonacci levels can't be called particularly accurate and because they only provide a target zone for a trading signal to appear and by no means do they make an actual trading signal, this strategy will likely be a handful for beginners. One has to have a sort of feel for it in order to make it work.