# Linear Regression Binary Options Strategy

The binary options trading strategy based on the LinRegressionBreakout_v1.1.ex4 indicator was originally built to trade breakouts.

However, our own study of this indicator shows that it can be put to more profitable use on a short term chart in the binary options market.

This revised strategy is what is discussed below.

Chart Setup

• MetaTrader 4 Indicators: LinRegressionBreakout_v1.1.ex4 indicator (default setting)
• Preferred Time Frame(s):  15 minutes
• Recommended Trading Sessions: Any time. Depends on when the indicator signal appears on the chart.
• Currency Pairs: Any. It can also be used on other asset classes.

TRADE Example (click the image for full size):

Strategy

The LinRegressionBreakout_v1.1.ex4 indicator will draw a channel (two parallel lines which touch the highs and lows of price action respectively). Price is expected to move from one line to another line in a consolidation before it finally breaks out.

Our job is to trade a PUT when price hits the upper line without breaking it, or trade a CALL when price hits the lower line without breaking it. It does not get easier than that.

Each trade is a 3-candle setup:

• Signal candle, which touches the upper without closing above it (PUT) or touches the lower line without closing below it (CALL).
• Entry candle, which must be allowed to pull back to the line just touched by the preceding candle if the closing price of the preceding candle is not at the trend line. This is important because in binary options, a single pip can make the difference between success and failure.
• Expiration candle: this is the candle whose closing price serves as the expiry price for the trade.

CALL ENTRY RULES

A CALL trade is setup when the following occurs:

• Price touches the lower trend line without closing below it.
• If the closing price of the first candle is just above the trend line, enter CALL at the open of this candle. If the closing price of preceding candle is some distance away from the trend line, allow the price to pull back to the trend line and then execute the CALL at that point of contact with the trend line.

Set the expiry time of the trade to close at the closing price of the next candle. This puts expiration time at 2 candle lengths or 30 minutes.

Early Exit Strategy

You can also close the trade early when the trade is in profit for a smaller payout.

Precautions: Even a single pip is important. Always allow pull backs as described above so you get a price advantage on your trade entry.

PUT ENTRY RULES

A PUT trade is setup when the following occurs:

• Price touches the upper trend line without closing above it.
• If the closing price of the first candle is just below the trend line, enter PUT at the open of this candle. If the closing price of preceding candle is some distance away from the trend line, allow the price to pull back up to the trend line and then execute the PUT at that point of contact with the trend line.

Set the expiry time of the trade to close at the closing price of the next candle. This puts expiration at 2 candle lengths or 30 minutes.

Early Exit Strategy

You can also close the trade early when the trade is in profit for a smaller payout.

Precautions: Even a single pip is important. Always allow pull backs as described above so you get a price advantage on your trade entry.