Pivot Points Touch Strategy for Binary Options
The Daily-Pivot-Points.ex4 indicator can be used to design several binary options trading strategies. The strategy described in this article is a Touch strategy.
- MetaTrader 4 Indicators: Daily-Pivot-Points.ex4 indicator (default setting).
- Preferred Time Frame(s): Any
- Recommended Trading Sessions: Any time. Depends on when the indicator signal appears on the chart.
- Traded Assets: any
Trade Example (Click the image for full size)
The indicator plots pivot points which will serve as areas of support and resistance for price action.
A Touch strategy requires determination of direction as well as range, and two pivot points straddling price action will provide this.
The key to the trade is to allow the price action to bounce on the lower pivot or be rejected at the upper pivot, so as to be sure that the price will stay in between both pivots.
If the Touch strike price is located within 15 pips of the pivot on which price action has either bounced or has been rejected, select the TOUCH component of the Touch/No Touch trade as it is very likely that price action will make contact with that strike price before the trade expires. 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 pips (15 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.
As is seen on the chart above, the focus of attention is the third area where price touched a pivot point located above it (green line).
The strike price for the Touch trade has been set at 15.4502, which is located between the pivot contact area and a 30-pip distance below.
With this in view, a TOUCH trade is initiated, knowing that the price action heading downwards, would trigger the Touch strike.
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 1 hour chart as is shown in this example, then the expiry time chosen must be up to two or even three hours.
About The Trading Indicator
The daily-pivot-points.ex4 indicator provides relevant support and resistance areas to determine price direction.
For this strategy, the reversal of price action on the pivot lines provides the direction for the trade.
With a little practice, it should be easier for the trader to pull of f successful Touch trades using this strategy.