Divergence Binary Options Strategy
The divergence binary options trading strategy is a strategy that utilizes the QQE.ex4 indicator to identify divergence opportunities when the market is oversold or overbought.
By trading the divergences, it is possible to trade the Call/Put option on your binary options platform.
MetaTrader 4 Indicators: QQE.ex4 (default setting), Line tool (optional tool used in default settings)
Preferred Time Frame(s): 1 minute, 5 minute, 15 minutes, 30-Minutes, 1-Hour, 4-Hours,
Recommended Trading Sessions: Any time the signal appears
Binary Options Trade Example (Click the image for full size)
The strategy is to look for when the indicator starts to diverge from the price action.
Usually the price action will correct itself in the direction of the divergence.
The key is to identify the divergence and this is done by using the line tool to trace the highs and lows of both price and indicator.
The QQE.ex4 indicator is unique as it presents a signal line which can move into overbought and oversold territories.
The strategy here is to detect the divergence, then open the trade if the indicator line is in the extreme areas of movement.
CALL Entry Rules:
A Call option is initiated when the following pattern is displayed on the chart:
- The indicator line is showing higher lows when price is forming lower lows.
- Use a trend line to trace out the lows of price action as well as the signal line lows.
- If the lows of the indicator are in oversold territory, allow the candle which forms thereafter on the chart to touch the trend line you have traced (i.e. pull back to this line) and enter a CALL trade once contact is made. You can see this on the chart above.
Set the trade to expire at the close of the 3rd candle. This chart example was shown from the 15 minute chart. Therefore the expiry time should be 45 minutes.
Early Exit Strategy
The trade can be closed early if the trade is in profit territory. This will give a reduced payout.
PUT Entry Rules:
A PUT option should be initiated if the following is seen on the charts:
- Price forms higher highs while indicator forms lower highs.
- Trace the highs on price and the indicator line with trend lines.
- On the trend line traced across the price action highs, allow the next candle to open and pull back to this line. Initiate the trade at the point of contact if the indicator highs forming the divergence are in overbought territory.
Expiry should be set to the closing price of the 3rd candle, which is 45 minutes for the 15 minute chart setup.
Early Exit Strategy
The trade can be closed early for a reduced payout if already in profit territory.
About The Trading Indicators
The QQE indicator is an oscillator which can point out divergence signals as well as price extreme points.
Success with this indicator relies on being able to detect the divergence as well as knowing exactly when to set up the trade to get the best price advantage.