This Touch/No Touch binary options trading strategy is traded using the MTF forex freedom bar indicator.
This is an indicator which paints colored boxes corresponding to its identification of the trend on four different time frames.
For this strategy, we will adapt it to trade the Touch component of the Touch/No Touch trade.
- MetaTrader 4 Indicators: MTF_Forex_Freedom_Bar.ex4 indicator (default setting); Preferred Time Frame(s): Any
- Recommended Trading Sessions: Any time. Depends on when the indicator signal appears on the chart.
- Assets Traded: Best used on currencies as the indicator was optimized for currency trading.
Trade Example (Click the image for full size)
The MTF_Forex_Freedom_Bar.ex4 indicator paints a number of boxes in the indicator window. These boxes could either be blue (bullish) or red (bearish).
The boxes are drawn for the M15, M30, H1 and H4 charts.
The strategy is to identify the direction as well as range of price.
This is done by using trend lines to trace minor support or resistance lines, and then using the color of the boxes to predict direction.
If the Touch price target lies within 10 pips of the commencement of the move, a TOUCH trade is chosen. This is demonstrated below.
TOUCH ENTRY RULES
If the trader intends to select Touch for the trade, the following is done:
- Wait for the price to either bounce on the pivot line below, or be rejected at the pivot line above.
- After the bounce or price rejection at pivot, check to see whether the strike price given for the Touch/No Touch trade is within 10 – 15 pips (30 pips for 1 hour time frame and above) of either the pivot line where price has been rejected or undergone a bounce.
- If yes, the trader should select TOUCH as it is most likely the strike price will be hit by price action. If no, wait for the next opportunity.
- For the 1st trade, the strike price has been set by the broker at 1.4626. The trend line bounce occurred and the box against the H1 time frame is blue, so price direction is determined to be upwards.
- Since the strike price is also above this point and lies within 30 pips from the trade entry candle’s open price of 1.4610, the trader can select the TOUCH component of the Touch/No Touch trade.
- The same principles are used for the second trade whose Touch strike price is set at 1.4535. Look at the chart and see how it works.
Expiry for TOUCH Trade
As a rule, the trade must be kept open for as long as possible so that there is a good chance of the strike price being hit.
If the trade is setup with the 15 minutes chart as is shown in this example, then the expiry time chosen must be up to one hour.
About The Trading Indicator
The MTF_Forex_Freedom_Bar.ex4 indicator is unique in its ability to enable the trader determine price direction for 4 different time frames.
However, the trader must also recognize how to use the trend lines to define the support and resistance areas as well as get the range in between which the Touch strike price is located.